WASHINGTON (CN) – Eighteen states and the District of Columbia sued the Trump administration Friday over the president's decision to scrap subsidies to health insurance companies that help cover the out-of-pocket medical costs of low-income Americans.
California Attorney General Xavier Becerra filed the lawsuit for the lead plaintiff, California, in San Francisco Federal Court. Any appeal, were one necessary, would thus go first to the Ninth Circuit.
President Trump's decision to end the payments, announced shortly before 11 p.m. eastern time Thursday night, marks the president's most aggressive attempt yet to dismantle former President Barack Obama’s signature legislative achievement, after months of failed GOP repeal efforts on Capitol Hill.
New York Attorney General Eric Schneiderman, responded almost immediately by warning the White House that a lawsuit would quickly follow the unilateral move.
“I will not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost,” Schneiderman said in a statement.
The decision follows Trump’s signing of an executive order earlier today directed federal agencies to rewrite regulations to allow trade associations and other groups to offer their own health plans. That order is expected to result in more loosely regulated health insurance plans that won’t have to comply with certain consumer protections and benefit rules written into the Patient Protection and Affordable Care Act.
President Trump threatened for months to end the cost sharing payments, leading health policy experts to speculate that it had created uncertainty in the individual market, leading some insurers to flee.
With his decision Thursday night, the White House is putting an immediate hold on$7 billion in payments due insurance companies this year.
In a press statement, the White House said it determined it could not lawfully make the payments based on a ruling from a federal judge, which found that the payments were unlawful because Congress did not appropriate the money for them.
The White House also took a jab at the Obama administration.
"The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system," the White House statement said. " Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people."
After Senate efforts to repeal and replace the ACA failed, the Senate Health, Education, Labor and Pensions committee launched a series of bipartisan hearings exploring ways to shore up the ACA.
Committee chairman Lamar Alexander, R-Tenn., said on September 7 that part of that effort should include appropriating money for the cost sharing payments.
The bipartisan effort ultimately collapsed late last month, but one thing the two sides had agreed upon was continuing the cost sharing subsidies through at least 2018, although Democrats and some experts had suggested funding the payments through 2020.
Most of the experts who testified at the hearings - including governors, state insurance commissioners and insurance executives - said that continued funding of the cost sharing payments would reduce some of the anxiety and encourage insurers to return to the individual market, staving off sharp premium hikes.
According to the Kaiser Family Foundation, cutting off the cost sharing payments will leave insurers faced with steep revenue shortfalls through 2018. In response, some will leave the ACA marketplaces while others will need to hike premiums to compensate for the lost payments.
Although the federal government will save money from not making the cost sharing payments, the foundation said that costs will subsequently rise for the tax credits that subsidize ACA premiums for low income enrollees that fall within 100-400 percent of the federal poverty level.
That cost would be 23 percent more that what the federal government would save by cutting the cost sharing subsidies, leading to a $2.3 overall spending increase in 2018, the foundation said.
Neera Tanden, president of the Center for American Progress, said with the latest move by the White House "Trump and Republican leaders in Congress have proven they will do everything in their power to take away health care from hardworking Americans.
"This act of sabotage will drive up premiums, drive away insurers, and incur vast costs for taxpayers. And, once again, it’s the middle class who will pay the price," Tanden said.
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