The Trump Administration Just Suffered Another Health Care Setback

A federal appeals court ruled that Democratic state attorney generals can defend Obamacare subsidies that reduce health care costs, even if the Trump administration decides not to.

A new court ruling will complicate any effort by the Trump administration to stop Obamacare subsidy payments that reduce health care costs for millions of Americans.

President Trump has repeatedly threatened to halt the subsidies. Over the weekend, he said in a statement via Twitter that if Congress failed to pass a new health care law, the “BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!”

House Republicans challenged the constitutionality of the subsidies in 2014, but that case has been on hold this year as the administration and Republicans attempted to repeal Obamacare and pass a new health care law. With that push unsuccessful thus far, and the latest effort flaming out last week, the subsidies case remains in play.

The case got more complicated on Tuesday, when a federal appeals court in Washington, DC, ruled that a coalition of Democratic state attorneys general could join the case to defend the subsidies. The order means that if the Trump administration decides to stop defending the subsidies, the case will press on.

The order cuts off one way that Trump could stop the payments — a way that would have given him the cover of a court ruling. A lower-court judge ruled in May 2016 that the subsidies were unconstitutional absent a funding appropriation by Congress — but she put her order on hold while the case was on appeal, so the payments to insurers continued. Absent outside intervention, if the administration had dropped the appeal, the 2016 order would have taken effect.

But if that happens now, the Democratic attorneys general will take over defending the payments.

The Kaiser Family Foundation estimates that this year, more than 7 million low- and middle-income people will receive cost-sharing reductions for out-of-pocket health care expenses. House Republicans argue the federal government is unlawfully making the payments without an annual congressional appropriation. The Obama administration argued that a separate, permanent appropriation already covers the subsidies.

It isn’t clear what will happen if Trump directs the agencies responsible for requesting and paying out the subsidies — the Department of Health and Human Services and the Treasury Department, respectively — to stop making payments while the lawsuit is pending. The Democratic state attorneys general could ask the DC Circuit to block any such directive, but lawyers following the case told BuzzFeed News they weren’t sure the court would have jurisdiction to do that.

The state attorneys general — or, for that matter, anyone else who claims they would be hurt if the subsidy payments stopped — could file a new lawsuit challenging Trump’s actions in federal court.

Speaking to reporters on Tuesday, New York Attorney General Eric Schneiderman said he would challenge any attempt to stop the payments, but wouldn’t commit to one particular course of action until it was clear what the administration would do. But he said he believes the DC Circuit would be able to block a directive from Trump ending the payments.

The DC Circuit’s order allowing the state attorneys general to intervene “should be welcomed by all Americans who depend on the health care system,” Schneiderman said, adding that an end to the subsidies would destabilize the entire health insurance market.

The order potentially helps the states in other ways. The court found that the states showed they would be harmed if the payments stopped and, as a result, had standing to join the case, a conclusion to which the states could point in any future legal action against the administration over the subsidies.

The panel also wrote that whether the administration could unilaterally stop the payments was a “debated legal question.”

A spokesperson for the Justice Department and a lawyer for the House Republicans declined to comment. Asked about Tuesday’s order, a spokesperson for Speaker Paul Ryan said in an email that Ryan “believes repeal and replace is the best course of action and that the Senate needs to act.”

“Sufficient doubt”

The Treasury Department has been making the subsidy payments to insurers through a permanent appropriation tied to a portion of the health care law that established premium tax credits for individuals who meet income requirements tied to the federal poverty level.

Republicans argued that the permanent appropriation did not cover the subsidies, and that paying them absent an explicit appropriation by Congress was unconstitutional. The Obama administration argued that the tax credit and cost-sharing reduction provisions were intertwined, and that no separate appropriation was needed.

In May 2016, US District Judge Rosemary Collyer in Washington, DC, sided with the House Republicans. Collyer wrote that the administration was trying to “squeeze the elephant” of the cost-sharing reductions into the “mousehole” of the tax credits provision.

The Obama administration appealed to the DC Circuit. The Justice Department filed a brief defending the subsidy payments on Oct. 24. The House Republicans were due to respond by Nov. 23.

On Nov. 8, President Trump won the election. On Nov. 21, House Republicans asked the DC Circuit to put the case on hold, saying that the new administration should have time to decide how it wanted to proceed. The underlying implication was that Trump, who ran against Obamacare, would consider dropping the administration’s defense of the subsidies. The DC Circuit agreed to delay the proceedings.

Individuals who said that they benefitted from the subsidies attempted to intervene in the case in December, arguing that there were already signs that the new administration’s interests in the litigation would no longer align with their own, but they were rebuffed by the court in a brief order.

The coalition of Democratic state attorneys general filed a motion on May 18 to intervene in the case. They argued that the states had a direct interest in the outcome of the case — without the subsidies, they said, insurance premiums would go up and more people would go without insurance, increasing the health care cost burdens for states.

The concern that the administration would switch sides in the case was no longer speculative, the attorneys general said, pointing to Trump’s public statements threatening to end the subsidies.

The argument proved persuasive, with a three-judge panel issuing Tuesday’s order allowing the states to intervene. The panel wrote that “the states have raised sufficient doubt concerning the adequacy of the Department’s representation of their interests.”

The case is on hold for now. The court ordered all of the parties to file status updates every 90 days. The next report is due by Oct. 30.