Judge Unlikely to Force Payment of Canceled Health Care Subsidies

SAN FRANCISCO (CN) – A federal judge on Monday all but declined to grant a nationwide preliminary injunction to force the Trump administration to keep paying Obama-era subsidies that reduce health care costs for lower-income Americans, saying states could not show immediate harm.

U.S. District Judge Vince Chhabria told lawyers for California, which is leading 17 other states and the District of Columbia in a lawsuit over the subsidies, that the Golden State had done too good a job preparing for the potential shortfall to merit an injunction.

“Covered California issued a press release two days before filing this lawsuit saying that four out of five people who purchase insurance on the exchange will either benefit or see no increase in their premiums, and you’re coming into court arguing harm,” Chhabria scolded. “Can you explain that to me?”

The plaintiffs argue in their lawsuit, filed in San Francisco federal court Oct. 13 – a day after Trump announced that he had canceled $7 billion in reimbursements to insurers – that canceling them will cause premiums spike and insurers to abandon the marketplaces set up under the Patient Protection and Affordable Care Act, commonly called Obamacare. The states will have to spend billions more on health care when people who can no longer afford coverage seek emergency care at state-funded hospitals, they argue.

With open enrollment roughly a week away, the plaintiffs warn the cancellation will throw marketplaces into “chaos” and asked for an injunction to keep them stable enough to encourage people to buy coverage. They had at first asked for a temporary restraining order by Oct. 19 to guarantee the next round of payments, which were due on Oct. 20.

“The uncertainty this injects into the system, it’s going to spook consumers,” California Deputy Attorney General Gregory Brown said. “It’s certainly going to spook insurance companies.”

But Chhabria tore down the plaintiffs’ assessment, telling Brown that the contingency plan California and most of the other plaintiffs had implemented to reimburse insurers had kept 2018 premiums either the same or reduced them.

The marketplaces offer a range of tiered plans – bronze, silver, gold and platinum. Under the state’s backup plan, according to Chhabria, California and more than 40 other states have allowed insurers to increase 2018 premiums for silver plans, leaving premiums in the other tiers untouched. People who receive tax credits under the health law to help pay their premiums will in turn get more money in credits next year, he said, allowing them to buy plans in other tiers or a comparably priced silver plan outside the exchange.

“You have the state of California standing on the courthouse steps denouncing the president for taking away peoples’ health care, when the truth is California has come up with a solution that is going to result” in more coverage options, Chhabria said. “To the extent that there is chaos and confusion, I wonder how much of it is California’s fault.”

Chhabria told the parties he will quickly adjudicate the case, which hinges on whether the payments to insurers are legal, instead of issuing an injunction.

When Congress enacted the Affordable Care Act, it created two separate programs to lower the cost of health insurance purchased on the state exchanges. The first involves a tax credit to subsidize insurance premiums for qualifying taxpayers and the second provides subsidy payments to insurers, which are required to reduce out-of-pocket costs to patients in exchange for reimbursements from the federal government.

The Trump administration says the insurer payments are illegal. It argues Congress permanently funded only the tax credit program under the health law and left the insurer payments to be funded via the annual appropriations process. The plaintiffs insist Congress permanently appropriated funds, and that the administration’s decision to cut off the payments violated the Administrative Procedure Act and the U.S. Constitution.

“Might the answer simply be because it was such a chaotic drafting process, that there were a lot of mistakes in the Affordable Care Act?” Chhabria asked, foreshadowing how he could rule in the case. “Why shouldn’t we just assume that the drafters forgot to deal with this?”

Justice Department attorney James Burnham in Washington represents the federal government.

Chhabria’s written ruling will be issued Tuesday.

 

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