Earlier this month, United States Federal District Court Judge Rosemary M. Collyer made an initial ruling in a much-awaited decision United States House of Representatives v. Burwell.
House v. Burwell raises two claims. First: Did the Obama administration violate the law by delaying the effective date of the Affordable Care Act's (ACA) employer mandate? And second: Did the administration violate the law by using marketplace premium subsidy monies to pay insurers for the cost-sharing assistance, including copayments and deductibles, they provide to eligible plan members, even though lawmakers never appropriated separate funding to do so? Under the U.S. Constitution, the government cannot spend money that has never been appropriated by Congress.
With respect to the employer mandate, Judge Collyer ruled that the House claim amounts to a general complaint about ACA's implementation policy and cannot proceed. But Judge Collyer also ruled that lawmakers do have “standing” to raise the cost-sharing claim, because, were the administration allowed to proceed unlawfully (as the House claims), the “entire Constitutional structure could collapse.” Judge Collyer noted that the House ultimately could lose were she to conclude later that its claims amount to a political argument. But Judge Collyer’s standing ruling, which she admits has “no precedent,” effectively greenlights the case to move forward.
Don’t expect an early resolution of the cost-sharing claim. The Obama administration has sought permission from Judge Collyer to appeal this ruling, and presumably she will allow the administration to do so, because the resolution of the standing question is so central to the case. This means that action on the merits will halt while the D.C. Circuit Court of Appeals, and ultimately the United States Supreme Court (should it choose to do so), review her decision. This could take years.
The House’s cost-sharing claim is not potentially fatal to the ACA as was the case with King v. Burwell, decided by the Court in June 2015. The King plaintiffs challenged the administration’s power to pay premium subsidies to eligible people whether or not their state had established a health insurance marketplace. Still, were the government to lose this latest case, there is no question that the loss could inflict serious damage both to insurers and plan members who depend on cost-sharing assistance.
The ACA provides financial help in two ways. The first is premium subsidies for eligible people who buy marketplace plans and have incomes between 100 percent and 400 percent of the federal poverty level. The second is cost-sharing assistance that insurers must provide to members with incomes up to 250 percent of poverty who choose a silver plan.
Cost-sharing assistance effectively raises a plan’s “actuarial value” (the average share of costs covered among a plan’s members), so that health plan members’ out-of-pocket costs are far lower than what they would be without assistance. The ACA’s cost-sharing for a silver health plan raises the actuarial value from 70 percent to 94 percent for people with incomes between 100 percent and 150 percent of poverty; to 87 percent for people with incomes between 150 percent and 200 percent of poverty; and to 73 percent for plan members with incomes between 200 percent and 250 percent of poverty. According to the Kaiser Family Foundation, a standard deductible in 2015 might drop from $2,559 to $229 for a member with income under 150 percent of poverty who enrolled in a silver plan. Copayments for specific services similarly drop dramatically, as do the maximum annual out-of-pocket payment obligations plan members might incur.
Without cost-sharing assistance, several things could happen to the 5.5 million people who, as of June 2015, received help. (About 2 million more would qualify for subsidies were they to choose a silver plan). First, the cost of care would rise—a lot—which in turn could lead many enrollees with less costly health needs to drop their plans. This would have the effect of skewing the marketplaces’ risk pool toward the sickest people, thereby raising premiums for everyone. Second, because insurers that participate in the marketplaces are legally obligated to provide cost-sharing assistance, they could suffer significant financial losses or decide to exit the marketplaces entirely, leading to major erosion of state insurance markets.
Because the ACA entitles insurers to government payments to offset their cost-sharing obligations, they conceivably could sue to recover what they are owed. But as Washington and Lee University School of Law’s Timothy Jost points out, insurers also would argue that, without government payments, they could not be constitutionally compelled to pay cost-sharing assistance.
The administration has never claimed that it can pay for the cost-sharing subsidies without an appropriation but, instead, that no specific appropriation is necessary (although in fact it asked for one in 2013). It argues that the premium appropriations can be used for this purpose. The answer to this question of what the law actually allows the administration to do may be a long way off, perhaps not to be resolved until after the 2016 presidential election. On the other hand, a claim that the President has violated the Constitution by spending money not appropriate by Congress may be viewed as sufficiently serious to trigger prompt review of whether the claim can proceed at all.