New York, Minnesota settle lawsuit over missing federal funding for health plan program

New York and Minnesota officials have settled a lawsuit against the Trump administration over its decision to slash federal funding for the states' health plan programs that cover certain low-income people.

A federal judge in the U.S. District Court for the Southern District of New York dismissed the case after the HHS agreed to pay $151.9 million to New York and $17.3 million to Minnesota by May 14 to fund the states' Basic Health Programs, which together cover 800,000 people.

HHS and the state officials will work together over the coming weeks to develop a revised funding formula for the program. HHS' interim payments to the states will be subject to reconciliation under the revised formula once it is finalized.

"We filed suit earlier this year to protect the quality, affordable healthcare on which New York's families rely," Acting New York Attorney General Barbara Underwood said in a statement Thursday. "We are gratified that the federal government has agreed to make this interim payment. We hope and expect that, in the coming weeks, we'll reach agreement with the federal government on a payment formula for the program, so that we can resolve this matter fairly and appropriately for all New Yorkers."

New York and Minnesota officials sued the Trump administration in January for cutting off federal funding used to operate the states' Basic Health Programs, which are insurance plans created by the Affordable Care Act to cover low-income people.

The Basic Health Program allows states to use federal dollars to set up health plans for people whose income is above the Medicaid threshold but below 200% of the poverty level. Legal immigrants are eligible for this program. New York and Minnesota so far are the only states operating the programs.

In New York, plan members spend at most $20 per month in premiums under the program—less than the average $90 per month people pay this year for silver plans on the exchanges after subsidies. Some enrollees don't pay any premiums. And in Minnesota, members pay at most $80 per month, according to the lawsuit.

Since 2015, HHS provided federal funding each quarter to the states with Basic Health Programs, but told state officials in late December 2017 that it would not pay the $266 million due to New York and the $32 million due to Minnesota for expenses in the first quarter of 2018, the lawsuit stated. The states said the HHS decision would ultimately lead to the loss of more than $1 billion annually in critical funding for the program.

HHS said the decision to stop the funding was related to the Trump administration's October 2017 decision to end cost-sharing reduction payments that lower out-of-pocket expenses for people who enroll through the public insurance exchanges. Funding for the Basic Health Program is in part determined by the amount of cost-sharing subsidies that would have been paid to people eligible for the Basic Health Program had they enrolled in an exchange plan.

The administration stopped paying CSRs because it concluded that Congress did not appropriate money for the payments. Several ACA marketplace insurers have sued over the missing CSR payments, and a judge recently granted them class-action status.

HHS in January also quietly withdrew a rule from review that outlined how the Basic Health Program would be funded next year. Republicans in Congress have said the Obama administration bypassed congressional authorization to fund the low-cost coverage program. Republican lawmakers argue that instead of seeking an appropriation, as required by the law, the administration redirected already appropriated taxpayer dollars to the Basic Health Program.