Health Reform WK-EDGE Court denies states’ request to require Trump to continue CSR payments
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Friday, November 3, 2017

Court denies states’ request to require Trump to continue CSR payments

By Susan. L. Smith, JD, MA

California and 17 other states failed in their request for an emergency ruling requiring the Trump Administration to continue making payments to health insurance companies to subsidize the cost of copayments and deductibles for low-income consumers. The request for an emergency ruling arose when the Trump administration terminated the cost-sharing reduction (CSR) payments after determining that the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) did not explicitly make the necessary appropriation. The court concluded that although the question of whether the ACA included the necessary appropriation is a close question, the Trump Administration had the stronger legal argument. Further, the court said that "the relief sought by the states would be counterproductive," adding that states have been working for months to prepare for the termination of the payments and "most state regulators have devised responses that give lower-income people better coverage options than they would otherwise have had" (State of California v. Trump, October 25, 2017, Chhabria, V.).

Cost-sharing reductions. Section 1401 of the ACA established the rules for the premium tax credit (see 26 U.S.C. §36B), while Sec. 1402 requires insurers to offer plans with reduced cost-sharing payments to lower-income individuals. In exchange for reduced cost-sharing, the federal government provides CSR reduction payments to insurers to cover their costs for providing those plans (see 42 U.S.C. §18071). According to the court, the ACA required the insurance companies to give people the reductions, and it required the government to pay the insurance companies in advance for the reductions, but it did not explicitly make a permanent appropriation for the CSR payments to the insurance companies.

Preliminary injunction. The court denied the states’ request for a preliminary injunction.Although the court determined that both sides had reasonable arguments as to the merits, the court concluded that the Administration has the stronger legal position. The states had argued that the appropriations were implied by virtue of other ACA provisions, while the Administration argued there was no explicit language providing for appropriations for CSR payments in the law.

The court considered how people will be affected in 2017 and 2018 without the preliminary injunction, and reviewed actions taken by the states in anticipation of the Administration’s decision to terminate CSR payments. It found that the large majority of people who purchase insurance on exchanges will either benefit or be unharmed. When state plans allow insurers to make up the deficiency caused by the loss of CSR payments through relatively large premium increases for "silver plans only," but no increase for bronze, gold, or platinum plans, the elimination of the CSR payments would not increase premiums for silver plans and premiums for other plans would go down. For people between 100 percent and 400 percent of the poverty level who purchase insurance on the exchange, tax credits rise substantially.

Parallel lawsuit. In a related case, House of Representatives v. Hargan (previously, Burwell), House Republicans brought a lawsuit against the Obama Administration challenging the legality of CSR payments. The court granted summary judgment to the House, but, pending appeal, the court permitted subsidies to continue during the abeyance (see Court puts cost-sharing appeal on hold, awaits possible Trump policy, December 7, 2016). Abeyance was granted after the 2016 election. On March 2, 2017, the court continued the abeyance for 90 days, and required a status report by May 22, 2017. On May 22, 2017, the parties requested another 90-day delay, after 15 state AGs filed a motion to intervene (see State AGs allowed to intervene in ACA subsidies case, August 9, 2017). The case is currently on appeal and stayed.

The case is No. 17-cv-05895-VC.

Attorneys: Nimrod Pitsker Elias, California State Attorney General's Office, for State of California. Steven Andrew Myers, U.S. Department of Justice, for Donald J. Trump, President, United States of America.

Companies: State of California; United States of America

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