A federal trial court judge has ruled that the Obama Administration cannot use federal funds to reimburse health insurers providing cost-sharing subsidies in the online health insurance marketplaces created by the Affordable Care Act (ACA). The judge won’t enforce her ruling pending an appeal to a federal appeals court. The ruling does not threaten the ACA as a whole, but it has likely alarmed at least some insurers still selling individual policies in the online marketplaces.
Under the ACA, individuals without access to affordable employer-based health insurance, and who are not eligible for Medicare or Medicaid, can obtain individual insurance policies in the online marketplaces. Depending on their household income and the type of policy they buy, they may qualify for one or both of two types of subsidies. One type defrays their premium cost. This kind of subsidy – technically called a “premium tax credit” — is the one most widely understood, and most widely talked and written about.
The other type of subsidy reduces what is known as the insurance policies’ “cost-sharing” requirements, like deductibles and co-insurance amounts. Where the policyholder qualifies for this latter kind of subsidy, the health insurer is supposed to be reimbursed by the federal government for the expense of reducing the cost-sharing requirements. About half of all individuals buying policies in the marketplaces qualify for these cost-sharing subsidies.
Congressional Republicans refused to authorize federal funding to reimburse the insurers, but the Obama Administration paid the monies anyway, arguing it didn’t need permission from Congress to pay them. The Republicans sued to stop the Administration from using appropriated funds pay the subsidies, and the federal trial court — after first concluding (not without some controversy) that Congress was a legitimate plaintiff to bring suit — agreed with the Republicans.
If the ruling stands it may put additional cost pressures on insurers selling policies in the marketplaces. They would be required to provide the cost-sharing reductions but they wouldn’t be reimbursed for the expense. That would, at a minimum, require them to raise premium prices. Or insurers might be able to make their own claims against the federal government, for reimbursement.
There is some doubt that the ruling will be upheld on appeal. The federal appeals court that will next hear the case might not agree that Congressional Republicans even had a right to bring their suit. Some legal scholars are convinced they did not. And even if the appeals court concludes the Republicans had the right, the court may not reach the same conclusion on the merits of the case as did the trial judge, who was appointed by President George W. Bush.