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The Facts —
- US District Judge Vince Chhabria for the Northern District of California declined to issue a ruling on Monday that would require President Donald Trump’s administration to immediately reinstate payment of health care insurance subsidies, known as “Cost-sharing Reduction payments,” according to the Star Tribune.
- CSR payments help reduce deductibles for low-income Americans’ medical expenses.
- Attorneys general for 18 states and the District of Columbia, led by California’s Xavier Becerra, argued for the immediate order on the grounds that without CSR payments the lowest income health care insurance consumers will have to pay higher deductibles and insurers will back out of the Affordable Care Act (“ACA” or “Obamacare”) health insurance markets, causing the system to fail, the Star Tribune reported.
- While declining to issue the ruling, Judge Chhabria stated, according to the Associated Press (AP):
“The state of California is standing on the courthouse steps denouncing the president for taking away people’s health care, when the truth is that California has come up with a solution to that issue that is going to result in better health care for a lot of people.”
- Chhabria, who was appointed by former President Barack Obama, noted during the hearing that California and other states had found a way to ensure some consumers would not pay more for insurance by limiting the plans for which insurers could hike premiums to offset for the lost subsidies and ensured that many consumers will receive additional tax credits for health insurance purchases, the AP reported.
- The California work-around will function with Obamacare silver plans as follows, according to a Los Angeles Times article published on 13 October:
- “[C]ost reductions [in the form of CSR payments] are available to policyholders in the Obamacare exchanges with incomes under 250 percent of the federal poverty line, or about $30,000 in income a year for an individual.”
- “Cutting off [the CSR] payments to insurers for the out-of-pocket discounts they provide to lower-income exchange enrollees does not mean those people will no longer get help. The law, and insurance company contracts with the federal government, require that those discounts be granted. That means insurance companies will have to figure out how to recover the money they were promised.”
- “For 2018, Covered California, the state health insurance exchange, has already prepared for Trump’s decision [to cut CSR payments]. This week, it announced that to offset the possible loss of the subsidies, it would add an average 12.4 percent surcharge to silver-level plans next year, on top of the regular annual rate hikes. That’s because only people enrolled in silver plans, the second-least-expensive option on the exchange, can qualify for the cost-sharing subsidies.”
- “Nearly 90 percent of exchange enrollees receive federal tax credits to help them with their premiums, and most of them will not pay more as a result of the surcharge since those credits will rise with their premiums. Covered California estimates that about three-quarters of subsidized consumers will pay the same as or even less than this year, despite the surcharge.”
- “Californians who make too much money to qualify for the federal premium assistance and do not receive discounts on their out-of-pocket expenses for care would be hit the hardest by the surcharge. To address that, Covered California created a new silver plan that will be sold outside the exchange that won’t be subject to the surcharge.”
- The states joined in the lawsuit, along with the District of Columbia, are, according to the AP:
- California, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington.
The Context —
- Even though Judge Chhabria noted that states had found a work-around for the loss of CSR payments, California attorney Gregory Brown argued for immediate reinstatement of CSR payments at Monday’s hear, stating that the loss of the subsidies was creating “uncertainty and chaos” that could lead insurance companies to opt out of Obamacare, and that the subsidy cut would “spook consumers,” according to the AP.
- Chhabria acknowledged that stability and certainty are important in health insurance markets, but said the possible harm the states raised could occur years down the road, before which the judge could have decided the lawsuit, removing the necessity for an order reinstating the CSR payments at this time, the AP said.
- The White House announced on 12 October that the federal government would not make the next round of CSR payments of subsidies to health insurers, according to The New York Times.
- The payments have been disputed since 2014, when the Republican-controlled House sued the Obama administration arguing the CSR payments were illegal since they were appropriated by the executive branch instead of being authorized by Congress, according to Business Insider.
- A federal judge ruled in favor of the House, but the Obama administration appealed, which allowed the CSR payments to continue and brings their status into immediate question again now, as the Trump administration signaled on 12 October that it would no longer pursue the appeal, Business Insider reported.
- The states listed above were permitted to intervene to keep the lawsuit going, Business Insider reported.
- House Minority Leader Nancy Pelosi (California) joined an amicus brief filed by The House Democratic Leadership and Ranking Members of relevant House Committees in support of the 18 states’ and the District of Columbia’s motion seeking the order to immediately reinstate payments. The brief stated:
“At the time the ACA was enacted, everyone in Congress understood that tax credits and Cost-Sharing Reductions would both be funded out of the same permanent appropriation… [and] subsequent congressional action confirms that cost-sharing reductions would be funded out of the same permanent appropriate as the tax credits.”
- The White House said in a statement on 12 October, according to Business Insider:
“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare. In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments.”
- Attorney General Jeff Sessions said, according to Reuters, that the CSR payments scheduled for 18 October would not be made. Reuters reported:
“The subsidies cost $7 billion this year and were estimated at $10 billion for 2018, according to congressional analysts.”
- Trump has made repealing and replacing Obamacare a priority since before taking office in January, as previously reported by The Whim.
- A joint statement released by Pelosi and Senate Minority Leader Chuck Schumer (New York) on 12 October stated that Trump will suffer backlash for his decision to end CSR payments from his supporters, who they say will be adversely affected by this move. The statement read:
“It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America. Make no mistake about it, Trump will try to blame the Affordable Care Act, but this will fall on his back and he will pay the price for it.”
Supporters of CSR Payments —
- House Minority Leader Nancy Pelosi (California) said in a statement calling for Judge Chhabria to order the immediate reinstatement of CSR payments on 21 October:
“Regardless of whether President Trump likes it or not, the Affordable Care Act requires the executive branch to make the cost-sharing reduction payments vital to lowering Americans’ premiums.”
- Chair of the Senate Health Committee Sen. Lamar Alexander (Tennessee) and Sen. Patty Murray (Washington) announced on 17 October that they have reached a bipartisan agreement to save CSR payments and allow states the ability to work around certain provisions in the ACA, according to Politico.
- The deal would would fund CSRs for two years, permit states to use waivers to approve health insurance plans with “comparable affordability” to ACA (also known as “Obamacare”) plans, and expand access to the option of catastrophic health insurance plans to individuals over the age of 30, Politico reported.
- Alexander said that he and Murray were “going to round up co-sponsors as best we can,” Politico reported.
- Sen. Murray said on 17 October:
“I’m very pleased that in the hearings and discussions with over half the senate, Chairman Alexander and I were able to find common ground on a number of steps to stabilize the markets and to help protect families from premium spikes as a result of the sabotage we have seen from this administration.”
- Sen. Lamar Alexander (Tennessee), Chairman of the Senate Health Committee, said in a press release dated 1 August that he urged Trump at that time to continue CSR payments through September, anticipating that Congress would pass a new healthcare bill by now that would alleviate the need for the payments. Alexander said:
“I have also urged the president to temporarily continue the cost-sharing reduction payments through September so that Congress can work on a short- term solution for stabilizing the individual market in 2018…
Cost-sharing reduction subsidies reduce copays and deductibles and other out-of-pocket costs to help low income Americans who buy their health insurance on the exchanges that would be (those who make under 250 percent of Federal Poverty Level, roughly $30,000 for an individual or $60,000 for a family of four)…
Without payment of these cost-sharing reductions, Americans will be hurt. Up to half of the states will likely have bare counties with zero insurance providers offering insurance on the exchanges, and insurance premiums will increase by roughly 20 percent, according to America’s Health Insurance Plans (AHIP)…
In my opinion, any solution that Congress passes for a 2018 stabilization package would need to be small, bipartisan and balanced. It should include funding for the cost-sharing reductions, but it also should also include greater flexibility for states in approving health insurance policies…
Now if the president were to approve continuation of cost-sharing subsidies for August and September, and if Congress in September passed a stabilization plan that includes cost-sharing for one year, it is reasonable to expect that the insurance companies would then lower their rates. They have told us, in fact Oliver Wyman an independent observer of health care, has told us that lack of funding for the cost-sharing reductions would add 11 to 20 percent to premiums in 2018.”
- Pelosi and Schumer said in a joint statement issued on 12 October:
“President Trump has apparently decided to punish the American people for his inability to improve our health care system. Trumpcare collapsed because Americans overwhelmingly recognized the cruelty and higher costs it meant for them and their loved ones. Now, millions of hard-working American families will suffer just because President Trump wants them to…
If these reports are true, the President is walking away from the good faith, bipartisan Alexander-Murray negotiations and risking the health care of millions of Americans.”
Critics of CSR Payments —
- House Speaker Paul Ryan (Wisconsin) issued the following statement regarding the Trump administration’s determination that certain payments under Obamacare have no valid appropriation, on 12 October:
“Under our Constitution, the power of the purse belongs to Congress, not the executive branch. It was in defense of this foundational principle that the House, under the leadership of former speaker John Boehner, voted in 2014 to challenge the constitutionality of spending by the Obama administration that was never approved by Congress.
The House was validated last year when a federal court ruled that the Obama administration had indeed been making unauthorized and therefore illegal payments through Obamacare. Today’s decision by the Trump administration to end the appeal of that ruling preserves a monumental affirmation of Congress’s authority and the separation of powers. Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with Trump administration to provide the American people a better system.”
- President Donald Trump signaled he would not sign off on saving CSR payments as included in Sen. Alexander’s and Sen. Murray’s deal, with a tweet on 18 October:
I am supportive of Lamar as a person & also of the process, but I can never support bailing out ins co’s who have made a fortune w/ O’Care.
— Donald J. Trump (@realDonaldTrump) October 18, 2017
- Trump’s tweet added to comments he made during a speech at The Heritage Foundation on 17 October, where he said:
“I’m pleased the Democrats have finally responded to my call for them to take responsibility for their Obamacare disaster and work with Republicans to provide much-needed relief to the American people. While I commend the bipartisan work done by Sens. Alexander and Murray — and I do commend it — I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies.”
- Trump tweeted on 12 October:
The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!
— Donald J. Trump (@realDonaldTrump) October 13, 2017
Stephanie Haney contributed to this report.