On July 10, 2017, the House of Representatives and the Trump Administration’s Department of Health and Human Services filed briefs opposing the motion by 18 state attorneys general to intervene in the government’s appeal of House v. Price. In addition, courts have recently rendered new decisions in litigation challenging regulatory protections against discrimination on the basis of gender identity and termination of pregnancy under Section 1557 of the Affordable Care Act.

The House brought this lawsuit challenging government reimbursements to insurers for legally required cost sharing reductions (CSRs) for low-income exchange enrollees; the House maintains that the payments are illegal because Congress has not appropriated the money to fund them.

The House won below. However, the lower court’s 2016 judgment has been on hold during an appeal filed by the Obama Administration in the District of Columbia Circuit Court of Appeals, and the appeal itself has been on hold since the fall as the House and the Trump administration have said they are negotiating a settlement.

In the meantime, insurance markets are destabilizing across the country. The Centers for Medicare and Medicaid Services released a press statement on July 10 stating that only 141 insurers had applied for participation in the federal exchange for 2018 in the 39 states it serves. This is down from the 227 initial applicants for 2017 and the 167 insurers that actually offered coverage in 2017. This destabilization is happening despite the fact that insurers in the individual market are doing much better financially so far in 2017 than they have in recent years. Insurers and insurance regulators have repeatedly identified ongoing uncertainty about whether the government will continue the CSR payments as a major cause of insurer reluctance to participate in the exchanges for 2018.

What The State Attorneys General Argue

The state attorneys general want to intervene in the appeal to avert a situation where the House and administration reach an agreement to dismiss the appeal and thus end the CSR payments, destroying their insurance markets. The AGs claim the right to intervene because they will be directly affected if this happens, in their capacity as owners of hospitals that will have to care for the resulting uninsured, as regulators that will have to deal with disintegrating insurance markets, and—for New York and Minnesota—as participants in the Basic Health Program, the funding of which depends in part on the availability of CSR payments. The states assert that the Trump administration was not adequately defending the legality of the payments and that their involvement in the litigation is necessary to protect their interests.

The House Brief

The House brief rejects every one of the states’ arguments. It first claims that the states lack standing because they cannot identify an injury in fact that is “concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.” The House argues that if the states would be injured by the end of the CSR payments it is their own fault. Their hospitals could cease participating in Medicare and thus avoid an obligation to care for victims in emergencies, and they could cease regulating their insurance markets and leave the job to the federal government. Moreover, Basic Health Program payments are based in fact on CSRs actually made, not on what the federal government would have otherwise spent on them—a remarkable conclusion.

More convincingly, the House argues that it is not clear how the participation of the states in the appeal could keep the CSR payments flowing. The court below ordered payments stopped, and it is not obvious how the appeals court could order them to continue: The Trump administration could stop the payments at any time, and a separate lawsuit would be required to protect them. The states argue that their presence in the lawsuit is necessary to avoid a judicial imprimatur for the position that the payments are illegal, but this in itself might not be enough to restore stability to insurance markets.

The House also argues that the states fail every other test for intervention: Their motion is not timely, as they should have guessed on election day that the Trump administration might abandon the Obama administration’s defense of the payments and intervened immediately; they lack a legally protectable interest in the action; the action does not impair their ability to protect their interests (they can always file a separate lawsuit to keep the payments flowing); and their interests are adequately represented by the federal government, which is presumed to represent all of its citizens. Finally, the House argues that the court should not grant permissive intervention, as the purpose of the states is to prevent a settlement of the case, which the court should favor.

There are at least two great ironies in the House’s position. The first is the House’s objection that the states lack standing because they have not suffered a concrete, particularized, and actual injury. This is precisely the argument that the government originally made as to why the House should not have been able to bring the lawsuit in the first place. It could readily be argued that the states will suffer a greater injury from the termination of the CSR payments than the House will suffer from their continuation.

Second, the House refers a couple of times to the danger that accepting the state’s arguments would “vest each state with the powers of a “roving constitutional watchdog.” Not only is this the power the House sought for itself in bringing this lawsuit, but it is the power that Republican- led states have sought over and over again during the past seven years challenging the ACA and its implementation, including the original Florida and Virginia lawsuits challenging the individual mandate; a West Virginia lawsuit challenging the Obama administration’s administrative fix, which allowed states to permit the continuation of ACA non-complaint plans; and a case brought by several states challenging the gender discrimination provisions of the ACA section 1557 regulations. Indeed, state litigation challenging the ACA and its implementation has been encouraged by Republican members of Congress.

The Administration Brief

The administration also filed a brief opposing intervention, but it is much shorter. The government has to argue that it does not need the help of the states to defend the CSR payments, and thus cannot explicitly oppose the position of the states that continued payment is legal. Indeed, the brief at least acknowledges the argument the Obama administration made that there is an appropriation grounding the payments.

Rather, the brief argues that relief is right around the corner—the Senate Better Care Reconciliation Act, “which the Executive Branch supports,” would fund the CSRs through 2019 and then eliminate them. In the meantime, the states make no arguments that the administration has not already made. And if the administration does decide to dismiss the appeal, HHS argues, the stats can move to intervene at that time. Finally, the states argument that the pending litigation is causing uncertainty, and that their participation could reduce that uncertainty, are too speculative to ground intervention.

Next the states will have the opportunity to respond, and at some point this summer we can expect a ruling from the court. Otherwise the case remains in abeyance until August. Insurers wait anxiously each month to see if the CSR payments will continue, and the states do what they can as their individual insurance markets slowly unravel.

Developments In Litigation Challenging ACA Regulatory Protections Against Discrimination Based On Gender Discrimination, Termination Of Pregnancy

In another case, both the Fifth Circuit Court of Appeals and the United States District Court for the Northern District of Texas have issued rulings in recent days in the Franciscan Alliance litigation. This case was brought by several religious organizations and states challenging the HHS ACA section 1557 nondiscrimination regulation insofar as it prohibits discrimination on the basis of gender identity or termination of pregnancy.

On December 31, 2016, Judge Reed O’Connor of the Texas federal court entered a nationwide preliminary injunction prohibiting enforcement of the rule, which was to have gone into effect on January 1, in these areas. Judge O’Connor concluded that the rule’s prohibition against sex discrimination based on gender identity was contrary to the statute; he held that the term “sex” as used in Title IX, on which section 1557 is based, “unambiguously refers to the biological and anatomical differences between male and female . . . as determined at . . . birth,”

At the time the case was filed, the American Civil Liberties Union and River City Gender Alliance had asked to intervene to protect their interests in prohibiting gender identity discrimination. On January 24, 2017, Judge O’Connor denied their motion to intervene as of right, holding that they had not shown that the Trump administration, the defendant in the case, would not adequately defend their interests. The ACLU and the Alliance had also asked to be allowed permissive intervention, but Judge O’Connor held that request for further briefing.

The ACLU and River City Gender Alliance appealed the court’s denial of intervention as of right to the Fifth Circuit, asking the court to also stay Judge O’Connor’s preliminary injunction against enforcement of the regulation pending their appeal. On June 30, the Fifth Circuit denied their appeal, apparently holding that because their motion for permissive intervention was still pending in the district court, the appellate court did not have jurisdiction to hear the appeal of the denial of intervention as of right. A concurring opinion by Judge Costa sharply criticized Judge O’Connor for delaying decision on the permissive intervention motion for more than nine months.

In the meantime, the Department of Health and Human Services moved that Judge O’Connor remand the case to it to reconsider the challenged provisions of the regulation. The plaintiffs objected and asked that the court enter a final judgment in their favor. Judge O’Connor held that remanding the case to HHS for reconsideration of the rule and staying all further proceedings (including a decision on the permissive intervention motion) until HHS reconsiders its rule would not prejudice the plaintiffs, who are still protected by the preliminary injunction, and would serve efficiency considerations. Judge O’Connor, therefore, on July 10 remanded the case in part to HHS and stayed further proceedings, with a status call on August 4, 2017.