Federal Judge Rosemary Collyer’s May 12, 2016 ruling in House of Representatives v. Burwell, found that the Obama administration (the “Administration”) has been improperly funding an Obamacare subsidy program.

House of Representatives v. Burwell involves two sections of The Patient Protection and Affordable Care Act (the “ACA”): Sections 1401 and 1402. Section 1401 provides tax credits to certain individuals to make insurance premiums more affordable, while Section 1402 reduces deductibles, co-pays, and other means of cost-sharing by insurers. The ACA tax credits outlined in Section 1401 were permanently funded through appropriations; however, neither the House of Representatives (the “House”) nor the Senate ever passed an appropriation for funding under Section 1402. The Administration recognized this in 2013, and requested such an appropriation from the House. The House refused, but the Administration proceeded to start paying cost-sharing subsidies to insurers in January 2014.

The House filed a lawsuit against the Administration arguing that that even though Congress never funded the Section 1402 cost-sharing subsidies through an appropriation, the Administration nonetheless drew and spent public monies on that program.

The question at issue in this case was whether Congress appropriated the money that the Administration has spent on Section 1402 reimbursements since January 2014.

The Administration argued that an appropriation in the ACA for premium subsidies under Section 1401 meant that Congress had also appropriated funds for Section 1402 cost-sharing subsidies. According to the Administration, Sections 1401 and 1402 are economically and programmatically integrated. The Administration also argued that because the House did not pass legislation explicitly defunding Section 1402 cost-sharing subsidies, the Administration was permitted to fund them.

The House argued that the Administration spent public monies that were not appropriated by Congress because an appropriation cannot be inferred; “a law may be construed to make an appropriation out of the Treasury…only if the law specifically states that an appropriation is made. See 31 U.S.C. § 1301(d). The House further argued that paying out Section 1402 reimbursements without an appropriation violates the Constitution.

Judge Rosemary Collyer ruled in favor of the House, finding that:

Paying out [cost-sharing subsidies] without an appropriation…violates the Constitution. Congress authorized reduced cost sharing but did not appropriate monies for it, in the [Fiscal Year] 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one.

Judge Collyer rejected the Administration’s argument and found that the Section 1401 premium tax credits and the Section 1402 cost-sharing subsidies were two separate and distinct programs under the ACA. Judge Collyer held that an appropriation for cost-sharing subsidies does not exist in the ACA and has not been included in any other subsequent legislation; therefore, the House has the right to obtain injunctive relief from any further cost-sharing subsidies being paid, unless or until Congress enacts an appropriation for such subsidies.

The ruling is on hold, and the subsidies will continue, pending an expected appeal by the Administration. If the ruling stands, there could be a significant financial setback for the millions of low-income Americans who benefit from the cost-sharing subsidies.