Insurers must decide by September 23, 2016 whether they will be offering qualified health plans (QHPs) in the federally facilitated marketplace (FFE) for 2017. Insurers choosing to do so must sign a QHP certification and privacy and security agreement.

The agreement contains standard provisions governing protection of enrollee privacy and secure electronic communications with the Centers for Medicare and Medicaid Services (CMS).

One term of the contract, however, has attracted attention. The agreement states that:

CMS acknowledges that [the insurer] has developed its products for the FFE based on the assumption that APTCs [advance premium tax credits] and CSRs [cost sharing reduction payments] will be available to qualifying Enrollees. In the event that this assumption ceases to be valid during the term of this Agreement, CMS acknowledges that the issuer could have cause to terminate this agreement subject to applicable state and federal law.

House v. Burwell

Quite obviously this provision addresses concerns raised by House v. Burwell. If the House ultimately prevails in this litigation, funding for reimbursing insurers for reducing cost sharing for their eligible enrollees could be terminated. A House victory would not, however, terminate the obligation of QHP insurers to reduce cost sharing, which would leave the insurers with substantial obligations not covered by their premiums.

Congress could decide subsequent to a judgment in its favor to appropriate funding for the CSRs. Insurers may also ultimately be able to enforce the obligation of the government to fund the CSRs through the Court of Claims. But in the interim insurers would face severe financial problems. The contract clause permits insurers to reduce their losses by terminating their marketplace participation, effectively transferring the cost of a house victory to low-income enrollees who would lose their marketplace coverage.

The agreement does not specifically state how much notice an insurer would have to give before terminating. Under federal regulations, an insurer must give 90 days’ notice before terminating an insurance product; although if the insurer were continuing the product in the individual market this provision might not apply.

The agreement does provide that termination of marketplace participation would not relieve the insurer of a continuing obligation to provide coverage for its enrollees for the full plan year under applicable state law. Under guaranteed renewal requirements of state and federal law, the insurer would have to offer continued coverage. Presumably, however, without the benefit of APTC and CSRs, most subsidized marketplace enrollees would drop coverage or cease to pay their premiums.

QHP insurers must generally give 90 days’ notice to enrollees who have APTC before terminating them for nonpayment (although they can pend claims after the first 30 days), but if a QHP insurer leaves the marketplace, presumably APTC ends as well. In most states that insurer would still have to give at least 30 days’ notice before terminating coverage for nonpayment.

Implications of the Potential Rulings

If the courts (presumably the Supreme Court) ultimately rule for the House and insurers begin to abandon the marketplaces under the contract provision, presumably none will remain to pick up enrollees terminated by other insurers. Insurers could, of course, dramatically increase their premiums to cover their unfunded cost-sharing obligations, but the time lag between when a judgment was handed down and the time when rates could be revised might well be too long for insurers to survive.

The ultimate losers in a victory for the House will be the millions of Americans who have finally been able to afford health care coverage—and health care—because of the Affordable Care Act (ACA)’s APTC and CSR assistance. The administration argues in House v. Burwell that Congress intended the ACA’s permanent APTC appropriation to cover CSRs as well. The fact that the ACA repeatedly (44 times by our count) links the APTC and CSRs as a single program makes this argument quite convincing. It is hard to believe that Congress intended the coverage offered lower income Americans through the ACA to depend totally on the vagaries of an annual appropriations process.

This is particularly true as insurers file their rates in the spring and Congress appropriates funding in the fall, making it virtually impossible for insurers to set marketplace rates if they have to guess each year whether Congress will fund the program.

The D.C. Court of Appeals will rule this fall or early next year whether or not to uphold Judge Collyer’s decision earlier this year ruling for the House in this dispute. It is most likely the Court will hold, based on well-established precedent, that Congress cannot sue the administration in federal court to impose its interpretation of a law, but must rather resort to the powers the Constitution affords it to enforce its will. The court would, therefore, dismiss the suit.

If the House prevails in the D.C. Circuit, and ultimately at the Supreme Court, the judgment is likely to have a devastating impact on the individual insurance market in the United States.