SAN FRANCISCO (CN) – A federal judge on Wednesday refused to block the Trump administration from ending Obama-era subsidies that reduce out-of-pocket health care costs for lower-income Americans, ruling that states could not show immediate harm.
In denying a motion for a nationwide preliminary injunction by 18 states and the District of Columbia, U.S. District Judge Vince Chhabria said the termination of payments, known as cost-sharing reduction payments, to insurers had in fact provided their residents with better coverage options for 2018.
“State regulators have been working for months to prepare for the termination of these payments. And although you wouldn’t know it from reading the states’ papers in this lawsuit, the truth is that most state regulators have devised responses that give millions of lower-income people better health coverage options than they would otherwise have had,” he wrote in a 29-page ruling.
The plaintiffs argue in their lawsuit, filed in San Francisco federal court on Oct. 13 – a day after President Donald Trump announced he had canceled $7 billion in reimbursements to insurers – that canceling them will cause premiums to 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 had warned that the cancellation would throw marketplaces into “chaos,” and asked for an injunction to keep them stable enough to encourage people to buy coverage. The administration called the prediction “speculative.”
Siding with the administration on Wednesday, Chhabria found the contingency plan that California and most of the other plaintiffs had implemented to reimburse insurers had kept 2018 premiums stable or reduced them.
The marketplaces offer a range of tiered plans – bronze, silver, gold and platinum. Under their backup plan, according to Chhabria at a Monday hearing, California and more than 40 other states have allowed insurers to increase 2018 premiums for silver plans only, 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.
“If the states are so concerned that people will be scared away from the exchanges by the thought of higher premiums, perhaps they should stop yelling about higher premiums,” Chhabria wrote. “With open enrollment just days away, perhaps the states should focus instead on communicating the message that they have devised a response to the CSR payment termination that will prevent harm to the large majority of people while in fact allowing millions of lower-income people to get a better deal on health insurance in 2018.”
In a statement issued Wednesday, California Attorney General Xavier Becerra used Chhabria's ruling to hammer home how necessary the subsidies are.
“The actions by the Trump Administration undermine critical payments that keep costs of health care affordable for working families," he said. "The judge made clear in his ruling that the ACA is the law of the land. Without an emergency order halting the Trump action, swift action in this litigation becomes even more compelling.”
Chhabria did, however, concede that the plaintiffs had a "reasonable" argument that the payments to insurers are legal – the question on which the case hinges. But he qualified his assessment, writing that "it initially appears the administration has the stronger legal position" because the health law didn't explicitly appropriate money for the insurer payments.
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 was a tax credit to subsidize insurance premiums for qualifying taxpayers, and the second provides subsidy payments to insurers to reimburse them for reduced out-of-pocket costs to patients.
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 that Congress permanently appropriated funds for the insurer payments when it appropriated them for the tax credits, and that the administration’s decision to cut off the payments violated the Administrative Procedure Act and the U.S. Constitution.
"It's a close and complicated question, even if the administration may seem to have the better argument at this stage," Chhabria concluded.
Allison Hoffman, a health care expert and professor at the University of Pennsylvania Law School, agreed, calling the states' argument "plausible" but "tenuous."
"When you have a law that clearly says the Secretary [of Health and Human Services] shall pay out these two sets of payments and there is an explicit permanent appropriation for one of them and the two are working together toward the same end, I think there is at least some argument there, they're not pulling this out of thin air," she said in an interview. "But the question is, how strong is this argument?
Justice Department spokeswoman Lauren Ehrsam said the agency was pleased with the decision Wednesday.
"As the only federal court to address this question found, the way that these Obamacare payments were made usurped Congress' spending power under the Constitution," she said in a statement.
Ehrsam’s statement refers to a 2016 decision in U.S. House of Representatives v. Burwell in the District of Columbia which deemed the payments illegal. In that ruling, U.S. District Judge Rosemary Collyer found Congress did not appropriate money for the payments. She barred further payments until Congress appropriates the money, though she stayed her order pending appeal.
California Deputy Attorney General Gregory Brown represents California and argued for the other states on Monday. Justice Department attorney James Burnham represents the federal government.
The lawsuit was filed by attorneys general in California, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington state and the District of Columbia.