You are here

Trump boxed in on health subsidies after legal win for states

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.

[WASHINGTON] 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.

Mr 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 US Court of Appeals in Washington 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 US$175 billion over 10 years, were never properly appropriated by Congress.

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.

Market voices on:

Republicans in the US House of Representatives challenged the payments in a 2014 lawsuit. Ruling in their favour in May 2016, US 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 entire case on hold within days of Mr Trump's defeat of Democratic presidential nominee Hillary Clinton last year. Mr 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.

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

The court's ruling makes it harder for Mr Trump to unilaterally discontinue the subsidies. The states can now immediately raise objections with the appeals court and seek to block any action by the president to end the payments. It also keeps the appeal alive - and Ms Collyer's ruling in place - in the event Mr Trump tries to drop it. The states asked the court for permission to join the case in May.

"The court's decision is good news for the hundreds of thousands of New York families that rely on these subsidies for their health care," New York Attorney General Eric Schneiderman said in a statement.

The cost-sharing-reduction payments are estimated to total more than US$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.

"We are worried about the continued uncertainty around the future of the CSR payments. Right now, millions of people are living month to month wondering if they will have access to affordable coverage this year or next. Insurers can't plan for next year and the market is increasingly feeling the effects," said Ceci Connolly, chief executive officer of the Alliance of Community Health Plans, in a statement.

On Tuesday, California said that health insurers that sell Obamacare plans in the state would double premium increases for some plans next year if Mr Trump makes good on the threat to end the subsidies.

The case is US House of Representatives v Price, 16-5202, US Court of Appeals, District of Columbia Circuit (Washington).