On May 18, 2017, attorneys general from 15 states and the District of Columbia, led by California and New York, filed a motion to intervene in House v. Price, formerly known as House v. Burwell.
The Legal Lay Of The Land
As readers of Health Affairs Blog know well, this is the case filed in November, 2014, by the House of Representatives to challenge certain actions taken by the Obama administration to implement the Affordable Care Act.
One of the actions challenged was the administration’s reimbursing insurers for their reductions in out-of-pocket limits and other cost sharing required by the ACA for individuals and families with incomes between 100 percent and 250 percent of the federal poverty level who enroll in silver (70 percent actuarial value) plans. The House claimed that Congress never appropriated money to fund these payments, and therefore the administration was making them unconstitutionally.
In May of 2016, Judge Rosemary Collyer ruled in the House’s favor on this claim, holding that Congress had not appropriated money to cover the cost sharing reduction (CSR) payments. She enjoined future payments until Congress appropriated funds. Judge Collyer stayed her order pending appeal.
The Obama administration did appeal to the District of Columbia Circuit Court of Appeals, filing its initial brief in October, 2016. The House asked for additional time to file its responsive brief. Then, when the election brought the Trump administration into office, the House asked that the appeal be stayed until the new administration took a position on the issue. At this point, pursuant to a further request from the House and the Trump administration for delay, the appeal remains in abeyance with the next status call scheduled for Monday, May 22, 2017.
In late December, 2016, two enrollees who receive CSRs filed a motion to intervene in the appeal. They claimed that their interests would be seriously injured if the appellate court allowed the lower court’s decision for the House to go into effect, and that the Trump administration did not adequately represent their interests in the appeal. After requiring briefs on the issue, the D.C. Circuit dismissed their motion to intervene in a one paragraph unsigned order, simply stating that the requirements for intervention had not been met without further explanation.
What The States Argue
The states’ motion contends that allowing the lower court’s order ending the CSR payments until Congress appropriates funding, and subjecting future CSR payments to an unpredictable appropriations process, would lead to higher insurance costs for consumers and to more insurers abandoning the individual health insurance market. This in turn would increase the number of uninsured, “hurting uninsured individuals and directly burdening the States.” They argue: “At a minimum, the annual uncertainty created by the district court’s decision would make the States’ task in regulating and providing health insurance to their residents more complex, unpredictable, and expensive.”
The states further assert that the Trump administration is not adequately representing their interests in the litigation, and that they must be allowed to intervene to ensure that those interests are protected.
To establish a right to intervene in an appeal, a party must show under federal rules that:
- Its motion is timely,
- It has a legally protected interest in the action,
- The outcome threatens to impair that interest, and
- No existing party adequately represents the intervener’s interest.
The states first argue that their motion is timely. The Obama administration vigorously defended its authority to reimburse the insurers for the CSRs without an appropriation additional to that provided by the ACA itself as long as it was in office. It opposed the motion by enrollees to intervene in January before President Trump took office as “premature” and “speculative” given the fact that the Trump administration had not yet taken a position in the litigation.
Since then, the states note, President Trump has made multiple statements indicating that he does not intend to continue to defend the CSR payments. President Trump told the Economist that he would end the CSR payments if he “ever stop[s] wanting to pay the subsidies.” Both President Trump and Attorney General Sessions have asserted that the CSR payments were “not authorized by Congress.” President Trump has also repeatedly threatened to stop pursuing the appeal unless Democrats negotiate with him on an ACA replacement. The House-passed American Health Care Act would continue the CSR requirement until 2020, but the bill provides no additional funding for the program, necessitating continued defense of the appeal to stop the lower court’s order from going into effect prior to that time.
According to the states, President Trump’s statements demonstrate that the administration cannot adequately represent the states’ interest in the litigation. Moreover, the states assert, they have a unique sovereign interest in administering their insurance markets and protecting their residents that no other party to the litigation can represent.
The motion next turns to describing the states’ interest in the litigation. Termination of the CSR payments, or even a requirement that the payments be annually appropriated, would harm millions of state residents and the states themselves. To begin, termination of the CSR reimbursements would cause insurers to raise premiums, by almost 20 percent over increases that would otherwise occur.
Even if Congress were to begin making annual appropriations to fund the CSRs, this would not necessarily solve the problem: insurers must submit their rates and exchange plans in the late spring and early summer for the next plan year and Congress does not appropriate funding until the fall. Insurers would have to raise premiums preemptively to cover shortfalls that would occur if Congress did not increase premiums. The premium increases would leave many state residents unable to afford health insurance, particularly those who do not qualify for premium tax credits.
Increased premiums would also qualify more individuals for the exemption from the individual mandate that applies to individuals who have to pay more than 8 percent of their household income for basic health insurance. With fewer people able to afford health insurance or required to buy it, the individual health insurance market risk pool would continue to deteriorate, as healthy individuals increasingly failed to purchase coverage.
An end to CSR payments would further cause more insurers to withdraw from the exchanges. Some insurers have already stated that they are going to withdraw from the marketplace for 2018 or will do so if the uncertainty surrounding the CSR payments is not resolved. Again, requiring annual appropriations for CSRs would not resolve the uncertainty insurers face as to whether CSRs will be funded in any future plan year. As more insurers withdraw, more individuals would become uninsured, particularly if counties are left with no insurers participating in the exchange.
As more individuals lost insurance coverage, the burden of the states to cover the uninsured would increase. This would directly increase the costs of state government. The ACA has resulted in a drop in uncompensated care costs for state health care facilities; defunding of the CSRs would once again increase those costs.
Moreover, New York and Minnesota, two of the intervener states, would suffer an additional direct financial loss if the CSR payments cease. Both offer a Basic Health Program, and BHP funding is based on the funds that would otherwise be paid for premium tax credits and CSRs for BHP-enrollees. One billion dollars of funding for the programs would be put at risk if the district court’s injunction takes effect—a shortfall the states would be required to make up.
Finally, the litigation is already increasing state administrative costs, and the implementation of the injunction would further increase those costs. States must approve insurer rate and form filings, and the continued uncertainty as to the payment of the CSRs is making this task very difficult, requiring consideration of multiple rate filings or of amendments to rate filings as developments affecting the CSRs occur. Moreover, even if Congress appropriated CSR funding on an annual basis, the administrative burden would continue because the status of appropriations would never be known until long after rates and forms would have to be filed.
For all these reasons, the states assert, they have a legally protectable interest in the litigation and standing to intervene. They further assert that even if the court fails to find that they have a right to intervene, they should be allowed permissive intervention because they have “claim[s] or defense[s] that share[] with the main action a common issue of law or fact” and that intervention would not “unduly delay or prejudice the adjudication of the original parties’ rights.”
Finally, the states assert that the “extraordinary circumstances” of the litigation—the catastrophic damage the upholding of the district court’s order would cause, the problematic jurisdictional basis of that order given the serious question as to the House’s standing to bring the case, and the possibility that an agreement between the House and the Trump administration could leave that order in place without an opportunity for appellate review—counsel strongly for allowing intervention.
What Comes Next?
House v. Price is currently set for a status report on Monday, May 22. It is not known yet what the position of the Trump administration will be at that time. If the administration asks that the case be left in abeyance, the next scheduled status report would be in 90 days—in late August after final QHP rates are due on August 16. If the Trump administration asks the court to dismiss the appeal, the states stand ready to take up its defense. In any event, the court will likely have to rule on the states’ motion well before the August date.
If the court permits the states to intervene, they will continue to make the arguments that the Obama Justice Department made in opposition to the lower court’s order—that the House lacked standing to bring the litigation and that funds for the CSR payments have in fact been appropriated. If the Trump administration decides unilaterally to stop making the payments, a new lawsuit would probably need to be filed in the district court to compel payment. A simple reversal of the district court’s order would probably not have the effect of requiring continued payment.
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