On December 5, 2016, the U.S. Court of Appeals for the D.C. Circuit issued an order to stay the administration’s appeal of the district court decision in U.S. House of Representatives v. Burwell, a case challenging Cost-Sharing Reduction (“CSR”) payments to health insurance issuers under the Affordable Care Act (“ACA”) Section 1402. The district court decision found that the House of Representatives had standing to sue the executive branch, that reimbursements to health insurance issuers for CSR requires an appropriation by Congress, and that the Obama Administration’s reimbursements to issuers of CSR without an annual appropriation was illegal. The D.C. Circuit’s stay order directed the parties to “file motions to govern further proceedings by February 21, 2017”—one month after President-elect Donald Trump’s inauguration.
Impact of the Stay Order
In effect, the D.C. Circuit’s order provides additional time for the president-elect to consider whether to withdraw the administration’s appeal and what will happen if it does so. If the Trump Administration withdraws the appeal, the district court’s holding will stand, cutting off CSR payments to health insurance issuers absent an appropriation by Congress. The stay order also provides time for the new administration and Congress to enact policy changes that would moot the case, either by repealing the applicable provisions or by appropriating funds for CSR payments.
It is not yet clear whether the Trump Administration will drop the appeal. On its face, the House Republicans’ challenge to CSR payments was an attack against the ACA. It eliminates certain payments to issuers of health insurance plans on ACA Exchanges unless Congress specifically appropriates funds for those payments (which it has not), making it impracticable to offer such plans and thereby hindering the viability of the exchanges. President-elect Trump has promised to repeal the ACA, which suggests that the district court’s decision prohibiting CSR payment absent an appropriation is consistent with his overall policy objectives. But, the decision found that a chamber of Congress has standing to raise a legal challenge in federal court against the exercise of executive power—a potentially unwelcome precedent for the Trump administration to leave unchallenged.
If the Trump administration does not withdraw the appeal, it may nevertheless become moot as the result of legislative changes. Specifically, Congress could appropriate amounts for CSR payments to maintain the status quo until the ACA is repealed or Congress could repeal those provisions of the ACA authorizing payment of CSRs. The absence of CSR payments would likely force issuers to leave exchange markets, causing losses of coverage and fewer options for individuals. Despite promises to immediately repeal the ACA, the political consequences of many individuals’ losses of coverage before replacement is enacted may be untenable.
The district court stayed its decision pending appeal, and issuers have continued to receive CSR payments to compensate for the reduction or elimination of enrollee cost-sharing amounts as required by the ACA. For the immediate future, the stay of the district court’s opinion permits continued reimbursements to issuers for CSR. The Trump Administration, however, could opt to discontinue making those payments even while the stay is in place by declining to make payments in the absence of an appropriation. If the administration drops the appeal without repealing ACA Section 1402, issuers would remain obligated to provide CSRs to enrollees, but they would not be reimbursed for the costs of those CSRs as required by the statute.
Options for Issuers
In the event that the Trump administration drops the appeal or otherwise leaves issuers with an uncompensated-for obligation to continue CSRs for enrollees, issuers may have several options.
First, issuers may file suit in the Court of Federal Claims under the Tucker Act to be made whole for any CSR payments to enrollees for which the government failed to make timely payment. The CSR statute obligates the federal government to make payments to issuers, and the absence of an appropriation to make such payments does not preclude a claim for payment under the Tucker Act. The Obama Administration acknowledged as much in its briefing before the district court.
Second, issuers may seek to terminate their qualified health plan (QHP) issuer agreements. To offer QHPs on federally facilitated and federal-state partnership exchange, issuers signed QHP issuer agreements that contain a provision allowing the issuer “to terminate this Agreement subject to applicable state and federal law.” Note, however, that termination of the issuer agreement would not affect state law obligations, such as requirements to continue coverage for enrollees for a full policy period. Even if the QHP issuer agreement is terminated, careful analysis would be necessary to determine whether and how a plan may be terminated or discontinued.
Finally, issuers may seek legislative or regulatory relief from the CSR provisions. The president-elect has repeatedly promised to repeal the ACA, but it is possible that an intermediate solution may be reached that achieves the dismantling of the Act without leaving health insurance issuers that participated in Exchanges with significant financial obligations for which they cannot be reimbursed.