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Judge Declines Request to Reinstate ACA Subsidies

by Precise Leads

October 26, 2017

A judge dismissed a petition to force the White House to resume subsidies to insurers on the ACA exchanges, leaving Congress to decide their fate.

On October 25, a U.S. District Court Judge in Northern California denied a request from more than a dozen attorney generals to force the Trump administration to resume subsidies to insurers on the ACA exchanges. A week prior to Judge Vince Chhabria’s ruling, President Donald Trump suspended these payments, which insurance companies use to cover copays, deductibles, and other out-of-pocket medical expenses for low-income ACA enrollees.

A Reuters report noted that the subsidies amount to roughly $600 million a month, with the annual cost for 2017 estimated at $7 billion. That total is expected to increase to $10 billion in 2018.

The cost-sharing reduction subsidies, or CSRs, have stood out as one of the more contentious aspects of the ACA. House Republicans sued the Obama administration over them in 2014, arguing that the CSR payments never received congressional approval. Although a federal judge agreed with the House Republicans, the case remains under appeal. House Republicans have until October 30 to decide their next move in the lawsuit.

No Harm Seen

Attorney generals from 18 states and the District of Columbia argued that ending the CSR payments would harm low-income residents in their states and destabilize the individual marketplace. In his ruling, however, Judge Chhabria countered that ending the CSR subsidies posed no significant threat because states had already taken steps to preserve affordable health insurance for low-income individuals.

“Most state regulators have devised responses that give millions of lower-income people better health coverage options than they would otherwise have had,” Judge Chhabria wrote in his ruling. Since state regulators were aware that President Trump would halt the payments, states either requested that exchange insurers submit rates calculated with and without the subsidies or permitted insurers to submit revised rates based on the assumption that they wouldn’t receive them.

A report released by Avalere Health estimated that 2018 premiums for popular ACA silver plans will rise by 34%, which, according to Judge Chhabria, would make other exchange plans less costly for enrollees receiving ACA tax credits. Exchange enrollees with moderate or low incomes are eligible for premium subsidies under the ACA’s advance premium tax credit program, which is considered separate from the CSR subsidies.

Denying the CSR subsidies might increase the federal deficit because the government will need to funnel more dollars to fund the premium subsidies. The Congressional Budget Office estimates a $194 billion rise in the deficit due to the stoppage of CSR payments.

Up to Congress

Judge Chhabria’s ruling may not be the last word on the fate of the CSR subsidies, as he himself hinted at in his ruling. “With the important caveats that the court has only been given a few days to study this complex matter and the states may not have fully developed all arguments, it initially appears the administration has the stronger legal position," Chhabria wrote.

The matter may yet be decided in Congress, where a bipartisan group of senators are working toward a solution to stabilize the ACA by continuing CSR funding. Although President Trump withdrew his support for that measure, U.S. Attorney General Jeff Sessions pointed out in a memo that Congress retains the ultimate authority to appropriate funds. “Congress has the power of the purse,” he wrote, “and it is up to Congress to decide which programs it will and will not fund.”

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