Administration, House Set to Update Court in Obamacare Payments Case

House Speaker Paul Ryan (Rob Kunzig/Morning Consult)
May 22, 2017 at 7:00 am ET

The White House and the House of Representatives are set to give a status update to a U.S. Court of Appeals on Monday in an Obamacare-related lawsuit, but it’s unclear whether any developments would be good news for insurers.

The update is an important step in the case, in which a district judge ruled the Obama administration unconstitutionally paid the Affordable Care Act’s cost-sharing reduction payments. It comes roughly a month before insurers must file their 2018 premium requests, and could offer more certainty for insurers about whether they would receive that crucial government funding.

Of course, a decision to stop the payments is not likely to make any insurance companies happy.

“Certainty that tells them that they’re not going to get their money isn’t very good certainty for them,” Gary Claxton, a vice president at the Kaiser Family Foundation, said in an interview Friday.

The government reimburses insurance companies for offering cost-sharing reduction payments to help lower-income people afford certain health expenses. House Republicans brought a lawsuit against the Obama administration, arguing it improperly funded the subsidies without a specific appropriation from Congress. The administration argued there was a permanent appropriation in the ACA for the payments, but a district judge ruled with Republicans last year.

The Obama administration appealed, and the payments are set to continue while the appeal is ongoing. But since taking office, President Donald Trump and other administration officials have suggested they wouldn’t continue the payments, rattling insurers who have been pushing lawmakers and the administration for the funding.

The uncertainty over the subsidies is one of the key reasons for a lack of stability in the individual market, experts and insurers say. Insurers in a few states, including Connecticut and Maryland, have already filed double-digit premium requests, citing instability in the marketplace as a factor.

There are a few different steps the parties could take on Monday, none of which would necessarily help stabilize insurance markets:

  • The two parties could ask to continue the hold and the court could grant it. Insurers would then face another 90 days of questioning whether the payments would be made.
  • The Trump administration could drop the appeal, letting the lower court ruling on the payments’ unconstitutionality stand. Insurers would then stop receiving the subsidies.
  • The Trump administration could continue to appeal, though insurers might still not get a final answer since the appeals court could side with the House.

If the payments stop, some insurers would likely decide not to sell policies on the exchanges next year. Others might have contracts that don’t allow them to immediately leave the exchanges, Claxton said, though they might try to do so anyway.

Insurers and state regulators have said the cost-sharing reduction payments are a top priority. Mario Molina, the former chief executive of Molina Healthcare, warned last month that the company would immediately exit the exchanges if the payments weren’t made.

That would result in about 650,000 to 700,000 people losing insurance coverage in 2017, and we would not participate in marketplace in 2018, resulting in over 1 million Americans losing health insurance coverage,” Molina said in a letter to congressional leaders.

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