Notice & Comment

What happens if the House wins its ACA lawsuit?

Sarah Kliff has a nice explainer at Vox about how the House’s lawsuit against the Affordable Care Act could get some traction. As I’ve said before, the case should be dismissed for want of standing, and I suspect that it eventually will be—if not by the district court, then on appeal.

But what if the House does somehow manage to prevail? As Kliff notes, there are two kinds of subsidies that help defray the cost of exchange plans. First, we’ve got premium tax credits, which were on the chopping block in King. Second, we’ve got cost-sharing reductions. They cap the amount of out-of-pocket spending for those who make less than 250% of the poverty level. Given that exchange plans tend to have high deductibles and lots of cost-sharing, the reductions are a critical part of keeping health care affordable.

It’s those reductions that the House has targeted in its lawsuit. In the House’s view, Congress never appropriated the money for the cost-sharing reductions. (The administration disagrees, arguing that an existing appropriation covers the premium tax credits also covers the cost-sharing reductions.) If the House is right, the federal subsidies have to end.

Even if that happens, though, it’s not right to say—as Kliff and others have—that the cost-sharing reductions will evaporate. Take a close look at how the reductions are structured. Health plans on the exchanges are required under the law to reduce cost-sharing levels for their enrollees who make less than 250% of the poverty level. The Treasury Secretary is then supposed to “make periodic and timely payments to the [health plans] equal to the value of the reductions.”

What if the Treasury Secretary can’t make those payments? Well, health plans would still have to adhere to the rules about reducing their customers’ cost-sharing. The 5.9 million people who get cost-sharing reductions would thus get to keep them. Health plans just wouldn’t get reimbursed.

Or would they? Even without an appropriation, health plans still have a statutory entitlement to cost-sharing payments. What that means in non-legalese is that Congress has promised to pay them money—whether or not there’s an appropriation. And health plans can sue the government in the Court of Federal Claims to make good on that promise. (Congress has undeniably appropriated the money to pay court judgments.)

So the question isn’t whether the government will pay the cost-sharing reductions. It’s when. If the government is right, Treasury can make pay health plans on a “periodic and timely” basis. If the House is right, health plans have to file thousands upon thousands of duplicative lawsuits to get the money.

That’d be bonkers, of course. Forcing health plans to pursue expensive and time-consuming litigation to recover what they’re owed doesn’t help anyone. The plans will just pass on the costs of the litigation, delay, and uncertainty to their customers. That’s why, if push comes to shove, I suspect that Congress will appropriate the money it’s supposed to pay. After all, there’s a longstanding convention that Congress honors its debts.

But who knows? Republicans’ antipathy to the ACA may be so great that they’ll grab any chance to wound it. Let’s hope the case is dismissed long before it comes to that.

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