Constitution Daily

Smart conversation from the National Constitution Center

Might insurers get ACA subsidies anyway?

October 20, 2017 by Lyle Denniston


A federal judge in San Francisco suggested on Thursday that insurance companies who face an imminent cutoff by the Trump Administration of subsidies for providing health coverage for lower-income people may have a legal right to get those payments anyway.

U.S. District Judge Vince Chhabria made the suggestion as he posed a series of questions for lawyers to answer in advance of a hearing next Monday on whether the government must keep up those payments – the so-called “cost-sharing reduction payments” under the Affordable Care Act.

Under the ACA, the government is to make payments to companies that sell insurance on the state-by-state marketplaces (“exchanges”) to offset the costs of providing that coverage at lower rates for people with limited income.  The payments cover co-pays or higher deductibles that the covered individuals otherwise would have to pay themselves.  The insurers have no choice but to absorb those costs, and then get their money back from the government.

This year, the payments were scheduled to reach about $7 billion.  The next scheduled payment was to be made on Friday, but President Trump last week decided that the government would stop the payments, which he denounced as “a bailout” of insurers.  He passed on to Congress the choice of whether to allow the payments, which are considered vital to the financial structure of the insurance exchanges and to keeping insurance bought there affordable.

Last week, 18 states and the local government in Washington, D.C., sued the President and other officials, seeking an order requiring the government to continue to pay the subsidies.   They contended that the ACA imposed a flat requirement that the payments be made, so the President’s decision to avoid doing so, they claimed, was a violation of his constitutional duty to “take care” that federal laws are carried.

The key dispute in the case is whether Congress, in enacting the ACA, provided authority for the payments to be made.  The Obama Administration has argued, and the suing state and local governments are now arguing, that the ACA provided permanent funding for those subsidy payouts.  The Trump Administration disagrees, arguing that Congress never specifically appropriated the money, so it cannot constitutionally be spent as the ACA requires.

Judge Chhabria was just assigned to the new case in federal trial court in San Francisco, and he is moving it along swiftly.  Although the challengers asked him to order the payments by afternoon today, because of the due date on Friday for the next payment, he did not do so.

Instead, he ordered a quick round of written briefs, and set a hearing for Monday afternoon.  Then, today, he sent the lawyers a list of questions that they are to answer in those briefs.  In one of those questions, the judge commented that “it appears that the government is now failing to meet its obligations” to make the payments, adding that this was either because Congress did not appropriate the money – the disputed constitutional issue – or because the government is refusing to make the payments that have been appropriated.

Then the judge raised this issue: “Is there any reason to doubt that the insurance companies would prevail in a Tucker Act lawsuit to recover the required reimbursements?”  (The Tucker Act, which dates all the way back to 1887, surrenders the federal government’s usual immunity to being sued for its official actions, to allow lawsuits to recover money that it owes to someone but has not paid.)

Judge Chhabria then went on to inquire whether the possible remedy of a Tucker Act lawsuit has an effect on the state and local governments’ lawsuit, and on how the judge should balance the opposing interests in that case.

Although a federal trial judge in Washington, D.C., has ruled, in a case filed by the U.S. House of Representatives during the Obama Administration, that Congress has not voted the money to cover the payments to insurers, Judge Chhabria is not bound by that ruling because it is by another trial court.   The Washington judge’s ruling against the payments is now under review by the U.S. Court of Appeals for the District of Columbia Circuit.

Although the Trump Administration has indicated that it intends to withdraw the government appeal in that case, because of the President’s cutoff of the funds, the D.C. Circuit has given a group of states – many of the same ones that sued in California over the issue – permission to enter the case in an effort to keep it alive.

Judge Chhabria, in a series of questions that suggested he wants to make his own ruling on the constitutional issue about whether Congress has put up the funds for the payments to insurers, probed the history of how the appropriations process has worked, whether there is a norm on actually approving all funds before they may be spent, and whether there have been court cases on the issue.

He also told the Trump Administration lawyers that, if they planned to argue in their brief that the states could not pursue their case in California because they already are involved in the case pending at the D.C. Circuit, they should advise him on how the states could get the payments issue decided “promptly” in that case.

He also asked government lawyers whether they could supply a state-by-state breakdown on whether insurers have already raised their rates, anticipating the cutoff of the subsidy payments, and how the judge is to know why they raised their rates, if they have.


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