February 22 Update: More ACA-Related Litigation Developments

Despite the change of administrations, ACA litigation continues. On February 21, 2017 the Supreme Court denied review of American Freedom Law Center v. Obama. This case challenged the Obama administration’s transitional policy under which individuals and small employers were allowed to keep ACA noncompliant policies after the ACA health insurance reforms became effective in 2014. The district court had held that the plaintiffs were not injured by the transitional policy and therefore had no standing to sue. The District of Columbia Circuit affirmed. The case has now reached the end of the line.

On February 17, a Sixth Circuit panel unanimously affirmed a district court decision dismissing a lawsuit brought by the State of Ohio challenging the application of the ACA’s reinsurance fee against the state of Ohio, its political subdivisions, and four Ohio state universities. The fee was assessed against insurers and third party administrators of self-insured employers to fund the program which reinsured insurers in the individual market for high-cost cases during 2014, 2015, and 2016.

Judge Karen Nelson Moore, writing for the court, rejected each of the state’s claims, holding that the ACA clearly applied the fee to all group health plans, including state and local governmental plans. The court also held that neither the anti-commandeering doctrine under the Tenth Amendment nor the intergovernmental tax immunity doctrine (to the extent it still exists) applied to protect the state since the fee was levied against governmental plans in a nondiscriminatory way and in the same way that it was applied to private group health plans. Thirteen states had filed an amicus brief supporting the state of Ohio.

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On February 21, 2017 the House of Representatives and the Trump administration Justice Department filed a joint motion in House v. Price (formerly House v. Burwell) asking the court to continue to hold the case in abeyance “with status reports due every three months beginning May 22, 2017.” The motion stated further, “The purpose of the abeyance is to allow time for a resolution that would obviate the need for judicial determination of this appeal, including potential legislative action.”

House v. Price is, again, the lawsuit brought by the House of Representatives against the Obama administration claiming that the administration was illegally reimbursing marketplace insurers for the cost of reducing cost sharing for their low-income enrollees; the House argued that Congress had never appropriated the money to pay the insurers. The Affordable Care Act requires insurers that cover marketplace enrollees to reduce cost sharing for enrollees with incomes not exceeding 250 percent of the federal poverty level. The ACA further requires the Department of Health and Human Services to reimburse the insurers for the cost-sharing reductions. The Obama administration claimed that Congress had appropriated the money to reimburse the insurers for the reductions along with the appropriation for the premium tax credits, which reduce premiums for low-income enrollees, but the House claims that no appropriation has been made.

The district court ruled in favor of the House and enjoined future payments until an appropriation is forthcoming. The lower court also rejected the Obama administration’s claim that the court could not constitutionally hear the lawsuit because the House had not been injured by the administration’s action. The district court stayed its injunction pending the administration’s appeal, and the administration filed its appellate brief in the fall. The House requested extra time to file its brief, and then, when President Trump was elected, asked for additional time to discuss resolution of the case with the Trump administration. In the interim, two beneficiaries of the cost-sharing reduction payments attempted to intervene to protect their interests, but the court rejected their petition.

If the House were to prevail ultimately in the lawsuit and Congress failed to appropriate funding to reimburse the insurers, the insurers would accrue billions of dollars in losses for 2017. Some insurers in HealthCare.gov states might try to take advantage of a clause in their contract that could allow them in to withdraw from the marketplaces. Some insurers might leave the individual market altogether. Few would be back for 2018 absent an appropriation to cover the cost-sharing reductions.

The Trump administration and the House have wisely decided not to risk the destruction of the individual market at this point. The administration has apparently reimbursed the insurers for February and will likely keep paying them until the matter is resolved. The House has never opposed paying the cost-sharing reduction payments, but has rather insisted that they not be paid unless Congress appropriates the money to fund them. The abeyance will give Congress time to do this.

The health insurers no doubt would prefer that this take place sooner rather than later, but with the new timeline released Friday, they have until June 21 to decide whether to participate in the marketplaces for 2018. One hopes that Congress will act well before then.