Ever since the Affordable Care Act (“ACA”) was passed and implemented, it has faced, and continues to face, legal challenges. One significant pending challenge is House of Representatives v. Price (referred to as House v. Price; formerly House of Representatives v. Burwell). House Republicans brought this case in 2014 to challenge the constitutionality of federal subsidies to insurance companies participating in the ACA’s health exchange marketplaces. If the House prevails in this case, it could potentially prompt insurers to withdraw from the ACA’s marketplaces, thereby causing the collapse of those markets. Alternatively, insurers who remained in the marketplace would need to raise premiums significantly in order to ensure adequate revenue. The end of insurer subsidies would be a significant (and perhaps mortal) blow to the ACA.
Below is a brief summary of the case’s history, the timelines for appeal, and what could happen if the House prevails in the case.
In 2014, House Republicans filed a lawsuit against the Obama administration challenging the administration’s constitutional authority to allocate funds to health insurance companies under the ACA. The ACA requires insurers participating in the health exchanges to reduce cost-sharing (out-of-pocket expenses) for enrollees with incomes 250% or lower of the Federal Poverty Level (“FPL”). In return, the Department of Health and Human Services (“HHS”) must reimburse the companies for these reductions. Currently, the federal government pays the funds from the Treasury.
In its lawsuit, the House argued that Congress had never appropriated the money to pay the insurers. Under Article I, section 9 of the Constitution (known as the “Appropriations Clause”), “[n]o money shall be drawn from the treasury, but in consequence of appropriations made by law.” This means that even when the government enacts a statute, it must also pass a law that appropriates funds to make the payment within the original statute.
The ACA does not contain explicit language that authorizes an appropriation for the insurer subsidies. When Congress passed the ACA, it linked premium subsidies (which are different from the out-of-pocket expenses subsidies) to an existing appropriation. The House asserted that this was not enough to satisfy the appropriations statute requirement for the insurer subsidies.
The Obama administration made three main counterarguments. First, the Obama administration argued that the House did not have standing to sue. Second, the administration claimed that even if the House had standing, Congress had in fact appropriated the money in question because one can infer from other sections of the ACA that Congress intended to fund the insurer subsidies. Finally, the administration contended that even if Congress has standing, and even if Congress had not appropriated the money under the premiums subsidies appropriation, the insurer subsidies were core to making the ACA function, and as such, Congress intended to pay the insurer subsidies.
First, the Obama administration argued that the House did not have standing to sue. Article III of the Constitution limits federal courts to deciding “cases or controversies.” This means the case must involve an actual dispute, and not just a difference of opinion about the law. The legislative branch cannot simply sue the executive branch when it does something the legislature does not like. The administration argued that the courts could not constitutionally hear the lawsuit because it had not injured the House with its action.
The House contended that it had standing to sue on the grounds it had been “divested utterly and completely of its most defining constitutional function.” Since the Constitution requires Congress to pass a separate appropriations bill for spending, to ignore that would go against the legislature’s constitutional rights. Thus, the House argued that it had suffered a particular and concrete harm for which it could seek redress in court.
Second, the administration claimed that even if the House had standing, Congress had in fact appropriated the money in question. Before the ACA, an existing, permanent appropriation gave the Internal Revenue Service (“IRS”) the power to issue tax refunds. Congress used this appropriation for ACA tax refunds; this would cover premium subsidies since they are, in fact, tax credits. The administration argued that when Congress had appropriated the money for the premium subsidies, it had also appropriated the money for insurer subsidies. The idea was that both of these subsidies served the same purpose – to help people afford insurance.
The House asserted that the administration’s argument was meritless because the cost-sharing reductions are not individual tax credits, but are instead payments to insurance companies. Thus, even if the two subsidies serve the same purpose, the reductions are not under the scope of the permanent appropriation.
Finally, the Obama administration contended that even if Congress has standing, and even if Congress had not appropriated the money under the premiums subsidies appropriation, the language of the ACA inherently authorized the payments.
The administration first pointed out that in some subsections of the ACA, certain parts of the law “are authorized to be appropriated such sums as are necessary.” Though this language is absent from the relevant section for the cost-sharing reductions, the administration argued that the absence of this language meant that Congress felt it was unneeded since that section was already thought to be funded permanently. The House argued that while this could indicate some Congressional intent, this cannot surmount the plain language of the law, which does not say anything about appropriations for insurer subsidies.
The administration further argued that the full context of the ACA makes the language ambiguous and thus subject to the administration’s interpretation, provided it is reasonable. The administration relies on King v. Burwell (2015); in that case, the court found that the statute could not function if it had been interpreted literally. However, the House countered that this did not apply here because the issue was a failure to appropriate, not a failure in drafting (as was the case in Burwell).
In September 2015, a Washington, D.C. federal district court judge agreed with the House and said that it had standing in the case. The court explained that the House had its constitutional rights infringed upon, and therefore the injury was concrete, particular, and redressable. As such, the court would hear the rights of the case within a few months.
In May 2016, the district court once again sided with the House, this time on the merits of the case. It agreed with the House’s above arguments, and held that the cost-sharing payments were unconstitutional. However, the court allowed the federal government to continue paying the funds from the Treasury as the Obama administration appealed.
However, on December 5, 2016, House Republicans successfully asked the D.C. Circuit Court of Appeals to delay the case until after President Donald Trump took office, arguing that the administration and legislature would likely be making sweeping changes to the ACA in the upcoming months. Under this line of reasoning, any court action would likely be unnecessary or irrelevant.
Then, on February 21, 2017, the House and the Department of Justice filed a joint motion seeking to submit a status report every three months beginning May 22. The purpose of this is to “to allow time for a resolution that would obviate the need for judicial determination of this appeal, including potential legislative action.” The U.S. Court of Appeals for the District of Columbia granted the motion. Currently, the case is on hold while the GOP-led Congress and the new administration try to work out their options, whether that be an ACA replacement or some other option.
There are several actions that the administration can take now that the Trump administration is in control, Republicans control the House, and the courts are allowing an abeyance. However, though it may appear that the courts are being lenient in their timeline, the clock is ticking: insurers must decide by June 21 whether they will participate in the ACA’s exchanges. Without the reduction payments, it is likely that companies will pull out of the marketplaces, as they will stand to lose a lot of money.
The most straightforward option would be for Congress to pass an appropriation bill for the reimbursement payments for insurers. The appeal would become moot, and the payments would go through as intended.
However, since the House Freedom Caucus (a coalition of the most conservative members of Congress) has gained a major foothold in Congress, it is unlikely that the House could pass any appropriations bill that would support the ACA. Still, House Energy and Commerce Committee Chair Greg Walden (R-Oregon) and House Appropriations health subcommittee Chair Tom Cole (R-Oklahoma) have recently called for lawmakers to fund the insurer subsidies. In addition, the concept of letting the ACA fail by doing nothing is unpopular, even among some in the GOP.
The Obama administration filed the appeal of the district court’s decision. If it wanted to, the Trump administration could withdraw from the appeal at any time, which would end the litigation and start a process to eliminate the subsidies. This could prompt insurers to leave the marketplaces in droves and lead to destruction of the marketplaces. Though President Trump has not made any public comment on the matter, he has made it clear that he does not support the ACA and wishes to repeal and replace it.
So far, the Trump administration and the House have elected not to risk the collapse of the individual market. According to Timothy Jost, writing for Health Affairs, the administration has “reimbursed the insurers… and will likely keep paying them until the matter is resolved.” However, if the administration wants to make good on its promise to let the ACA collapse, this would be a perfect opportunity to do so. Doing so could prove to be unpopular with the American public; in a recent poll, 79% of Americans surveyed said that Trump should “seek to make the law work as well as possible, not to make it fail as soon as possible.”
Alternatively, the parties could settle, allowing the payments to continue without adopting an appropriations statute. At the moment, this scenario is unlikely; not only would both parties have to agree, but the district court would need to throw out the case and its decision. To do that, it would need to change its previous order, which it can only do if there have been “significant changes either in factual conditions or law.”
Though the district court may agree that Trump’s election qualifies as a significant change in factual conditions, it may be hesitant to agree to a settlement. After all, this is no mere settlement over a contractual dispute. The court held these payments as unconstitutional. To allow a settlement would be to accept the unconstitutional payments.
Even if the court was willing, it appears that House Republicans are unwilling to drop the litigation. On March 30, Speaker Paul Ryan said that they would not drop the lawsuit because “we believe in the separation of powers. We believe in Congress retaining its lawmaking power.” However, he also confirmed that while the lawsuit is being litigated, the administration will fund these benefits.
The Trump administration and the House could also ask for the appeal to be kept on hold indefinitely. This would allow the administration to continue its payments without worrying about passing another appropriations bill. This option would please insurers, moderate Republicans, and democrats alike, as it would continue payments. It would also allow time for Republicans to come up with a game plan to repeal the ACA, making these payments moot.
However, the appeals court may not allow this for long. It may see this move as an attempt to avoid the courts and continue administering an unconstitutional law.
Furthermore, insurers will place pressure on all parties involved, as having this litigation pending will make companies nervous. If the appeal remains pending for too long, insurance companies may even raise their premiums to compensate for the risk of staying on the marketplaces.
Trump’s Ominous Threat to Withhold Payment from Health Insurers, Explained
Updated on April 27, 2017
The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments
Kaiser Family Foundation
April 25, 2017
Health Subsidies for Low Earners Will Continue Through 2017, G.O.P. Says
The New York Times
March 30, 2017
Impact of Cost Sharing Reductions on Deductibles and Out-Of-Pocket Limits
Kaiser Family Foundation
March 22, 2017
Joint Motion to Continue Abeyance (Filed in U.S. Court of Appeals, D.C. Circuit)
Tom Price and House of Representatives
February 21, 2017
Parties Ask Court To Keep Cost-Sharing Reduction Payment Litigation On Hold
Health Affairs Blog
February 21, 2017
How A President Trump Could Derail Obamacare By Dropping Legal Appeal
November 9, 2016
U.S. House of Representatives v. Burwell (Opinion on the Merits of the Case)
D.C. Federal District Court
May 12, 2016
U.S. House of Representatives v. Burwell (Opinion on House’s Standing to Sue)
D.C. Federal District Court
September 9, 2015