Eric Schneiderman for Attorney General

“Bloomberg Politics: Trump Boxed In on Health Subsidies After States’ Legal Win”

August 3, 2017

As published by Bloomberg Politics, on August 2, 2017.

President Donald Trump’s power to clamp off critical Obamacare subsidies took a hit after a federal court ruled that a group of states can join a legal battle over the payments.

Trump has threatened to end the subsidies if senators don’t resume their efforts to pass an overhaul of the Affordable Care Act, after the latest push failed in a dramatic middle-of-the-night vote last week.

Pulling the plug on the payments, which reimburse insurers for offering reduced deductibles and co-pays to lower-income people, could upend health insurance markets. Lawmakers from both parties and the insurance industry have urged the president not to cut off the subsidies.

The administration faces a changed calculus after the U.S. Court of Appeals in Washington late Tuesday granted 17 states and the District of Columbia the legal right to defend the subsidies, known as cost-sharing-reduction payments. Led by New York and California, the states will push for a reversal of a lower-court decision that the payments, projected to be $175 billion over 10 years, were never properly appropriated by Congress.

Risk for States

In its three-page ruling, the appeals court allowed the states to join the case because there was “sufficient doubt” about whether the administration would protect their rights.

The states have showed “a substantial risk” that an end to the subsidy payments “would lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the States will have to provide health care,” the court said.

New York Attorney General Eric Schneiderman, in a Wednesday press call, said he believed the appeals court has jurisdiction to issue an order barring Trump from cutting off the cost-sharing payments, but that he and his peers would tailor their response to address whatever course of action the president took.

“It’s hard for us to predict exactly what they’re going to do,” Schneiderman said of the administration. Vowing to defend the subsidies, he added, “He’s not going to get away with this without a challenge.”

Legal Limbo

Republicans in the U.S. House of Representatives challenged the payments in a 2014 lawsuit. Ruling in their favor in May 2016, U.S. District Judge Rosemary Collyer in Washington barred the government from paying the subsidies without an appropriation but put her decision on hold for an anticipated Obama administration appeal.

House Republicans asked the appellate court to put the case on hold after Trump’s defeat of Democratic presidential nominee Hillary Clinton last year. Trump had campaigned on the promise to repeal and replace Obamacare, but has been stymied by his party’s inability to round up enough Senate votes. The House passed a repeal-and-replace bill earlier this year.

The president is working with his staff and his cabinet to consider the issues raised by the CSR payments, according to a White House official who spoke on condition of anonymity.

Lamar Alexander, the Tennessee Republican who heads the Senate’s health committee, said on Tuesday that he’s urged Trump to fund the subsidies through September to give Congress time to finance the payments for a year.

A bipartisan group of governors called on Wednesday for the cost-sharing subsidies to be funded through 2018. “This is a necessary step to stabilize the individual marketplaces,” the National Governors Association said in a statement.

Question of Authority

The states’ entry into the legal battle complicates the president’s cut-off gambit, two legal scholars said in separate interviews.

“He certainly has the power” to halt the payments, said Timothy Jost, professor emeritus at the Washington & Lee University School of Law in Lexington, Virginia. “Whether he has the authority is a harder question.”

Prior to Tuesday’s decision, the Trump administration could have said it agreed with Judge Collyer’s determination there was no authorization to make the payments and withdrawn the Obama-era appeal, enabling Collyer’s ruling blocking the payments to take effect, he said.

Now, the state attorneys general are positioned to at least keep the appeal alive, and Trump can’t claim judicial authority if he stops the payments, Jost said. “The D.C. circuit may even block the Trump administration if the president tries to cut the payments off,” he said.

Case Western Reserve University law professor Jonathan Adler said he isn’t convinced that the administration can halt the payments “unless and until the case goes away.” Because Collyer’s order is on hold, the attorneys general could ask the appeals court to maintain the status quo until they reach a decision on the lower court’s ruling or the case is settled.

Adler said Trump’s rhetoric about stopping the payments to force legislative action may have prompted the appeals court to grant the state’s request to take up the fight. The states asked for permission to join the case in May.

Trump is effectively saying “because you didn’t do what I wanted, I’m going to hold this hostage,” Adler said. “Even if one argues the president’s statements should be discounted, they don’t help.”

Out-of-Pocket

The cost-sharing-reduction payments are estimated to total more than $7 billion this year, and help cover costs for about 7 million of the health law’s enrollees.

Without the payments, insurers have said that they may drop out of the Affordable Care Act’s exchanges or substantially raise premiums. Already, insurers have requested large premium increases for next year amid uncertainty over the administration’s plans.