In a case brought by House Republicans, a federal district judge ruled on May 12 that the cost-sharing subsidies are illegal. Congress had never explicitly appropriated those funds. The White House contends that the authority to spend the money is in the ACA statute itself. The judge didn’t buy it.
The judge did not actually stop those payments, pending a likely appeal. This case, House of Representatives v. Burwell, could endure for a while and ultimately end up before the Supreme Court. It poses a different set of legal issues, surrounding limits of executive powers and Congress’s authority over spending, than the prior Supreme Court ACA rulings.
The ruling is politically damaging to the White House and its allies. How damaging it ultimately is to the ACA remains to be seen.
Let’s be clear about these subsidies:
This case does not affect the tax credits (which were the issue in King v. Burwell) that help people with incomes up to 400 percent of the federal poverty level afford their premiums. Those are intact.
These are the cost-sharing subsidies for people earning less than 250 percent of the poverty level who buy silver plans in the exchanges. They reduce out-of-pocket costs for medical care – helping with co-pays, deductibles and the like.
And they don’t get paid directly to the beneficiaries – it’s not a refund. The insurers pay the doctors, hospitals or other providers – and the providers are entitled to those payments under the law no matter what the courts ultimately decide.
If the insurers remain on the hook, the costs could well get passed on to everyone in the form of higher premiums. Or, some conservative analysts argue, the insurers will simply drop out of the exchange markets.
Ultimately this may well get settled by the next president and the next Congress – there are ways to fix this legislatively (but, of course, both parties have to want to fix it). A Democratic administration is much more likely to push for a solution than a Trump administration.
Although this case could prove damaging to the ACA, attacking the law was not the impetus for this suit. The issue was the animus between the House Republicans and the president, and their contention that President Obama overstepped the bounds of executive power, in this case by spending money that had not been clearly and specifically appropriated by Congress for this purpose. They could have chosen another area where they though Obama had overstepped – alternatives were discussed. But hitting Obama – and Obamacare – turned out to be the right set of targets for the House.
For more analysis, see this article by American Enterprise Institute’s Tom Miller, this National Review commentary by conservative health analyst Chris Jacobs, this Incidental Economist post by University of Michigan legal scholar Nicholas Bagley and this analysis by Tim Jost on the Health Affairs blog.