On Thursday, May 12, 2016, the United States District Court for the District of Columbia ruled against the Obama Administration and in favor of the House of Representatives in House of Representatives v. Burwell, the latest installment in a now-familiar pattern of legal challenges aimed at the Affordable Care Act (ACA). Judge Rosemary M. Collyer held that the government has unconstitutionally spent billions of dollars since January 2014 by reimbursing health insurance companies for federally-mandated reductions in cost-sharing for eligible individuals enrolled in plans offered on health insurance exchanges. This decision arrives on the heels of Judge Collyer’s controversial ruling in September 2015 that the House of Representatives has standing to pursue this case.
At issue in House v. Burwell is Section 1402 of the ACA, which generally requires health insurance companies offering plans through the state and federal exchanges to reduce cost-sharing, including deductibles, co-payments, and coinsurance, for consumers with incomes up to 250% of the federal poverty line. By statute, the insurers must then be reimbursed by the government for the amount of those cost-sharing reductions—roughly $5 billion in 2015 alone.1 The provision lowers out-of-pocket costs for the 5.9 million low- and moderate-income Americans who currently receive cost-sharing subsidies. Changes to this scheme could upset the stability of the exchanges by altering the risk pool, and ultimately could raise insurance premiums for consumers as well as the cost to the government of the ACA’s premium subsidies.
Unlike other ACA litigation that has taken direct aim at the validity of a provision itself, the suit filed by the House alleges not that Section 1402 itself is unconstitutional, but rather that the Administration acted unconstitutionally when it spent federal dollars under Section 1402 without an attendant appropriation from Congress.
In her ruling, Judge Collyer reaffirmed her previous ruling that the House has standing to maintain its claim based on the constitutional separation of powers among the branches of government – specifically, the House’s power of the purse – and rejected the Administration’s contention that the case presents only a disagreement over statutory interpretation between the executive and legislative branches that is unfit for judicial review.
Judge Collyer then turned to the Administration’s arguments that the ACA’s cost-sharing subsidies are linked to the appropriation for the ACA’s premium subsidies, and that it makes no sense for Congress to have provided for the cost-sharing subsidies without appropriating funds for them. Judge Collyer disagreed, noting that, since the ACA’s passage, Congress has “expressly and explicitly refused to include funds for the 1402 cost-sharing subsidies in the relevant appropriations bills that the president signed,” and emphasizing that, under federal appropriations law, Congress’s intent to appropriate federal dollars must be clear.
This ruling threatens an estimated $136 billion in cost-sharing subsidies from 2016 through 2025.2 For now, however, it has no effect: Judge Collyer stayed her decision pending any appeal. And it is virtually certain that the Administration will appeal to the D.C. Circuit. There, the focus will be on how the Administration’s jurisdictional defense based on standing will fare. The possibility that the litigation could persist beyond the end of the current Administration adds another element of uncertainty: There could be a change in the Administration’s position depending on the next President.
Notably, Judge Collyer’s opinion suggested a possible mitigation strategy should the decision be upheld on appeal. Judge Collyer noted the possibility – without ultimately opining on it – that, if the government could not fulfill its statutory obligation to reimburse insurers for their cost-sharing reductions for lack of an appropriation, the insurers could sue the government under the Tucker Act and recover out of the Judgment Fund. In doing so, she recited a number of potential practical concerns. Still, her opinion suggests that there might be an option to salvage reimbursement for the cost-sharing subsidies in the event that the lawsuit is ultimately successful.