Tuesday, November 22, 2016

House Seeks Pause In Cost-Sharing Reduction Litigation

Tim-ACA-slide

On November 21, the House of Representatives filed a motion to “Hold Briefing in Abeyance or, in the Alternative, to Extend the Briefing Schedule” in House v. Burwell. To recap briefly, House v. Burwell is a lawsuit brought by the House of Representatives challenging the payments the administration is making to insurers to reimburse them for reducing cost sharing for low-income marketplace enrollees. The House claims that no funds have been appropriated for the cost sharing reduction (CSR) program and that the reimbursement payments are thus illegal. The administration asserts that the appropriation Congress adopted for the premium tax credits includes the CSR payments, which cover almost 60 percent of marketplace enrollees. The administration also argues that Congress does not have standing to sue the administration and thus the court lacks jurisdiction to hear the case.

In May, a federal district court sided with the House and enjoined further CSR payments. The Obama administration appealed to the District of Columbia Circuit Court of Appeals and the lower court stayed its order. The federal government filed its appellate brief in October. The House’s brief was initially due in November but the court granted its motion to extend the due date to December 23, 2016. The government’s final reply brief is currently due January 19, 2017, the final day of the Obama administration.

The House’s November 21 motion would delay any further action in the case until a status call on February 21, 2017. It states that “Appellees’ representatives and the President-Elect’s transition team currently are discussing potential options for resolution of this matter, to take effect after the President-elect’s inauguration on January 20, 2017.” The brief cites “public statements by the President-elect and his campaign, of meaningful change in policy in the new Administration that could either obviate the need for resolution of this appeal or affect the nature and scope of the issues presented for review.” Alternatively, the House asks that the due date for its brief be extended to February 6, 2017.

The House argues that delays in ongoing litigation to allow a new administration to assess and articulate a change in policy and litigation posture are common. The brief also notes, however, that the Obama administration, which is currently in charge of the litigation, does not consent to the delay.

House v. Burwell presents an immediate and pressing challenge for President-elect Trump and the incoming Republican Congress. Both have claimed to support immediate repeal of the ACA, but there is a widespread consensus that immediate repeal of the ACA is not possible legislatively, given the likelihood of a filibuster. Although repeal of key provisions of the ACA could take place relatively quickly through reconciliation legislation, repeal without replacement could leave 20 million Americans without coverage, a politically risky gambit.

An agreement between the Trump administration and the House to dismiss the appeal in House v. Burwell and let the lower court’s order to stop reimbursing insurers for cost-sharing reductions stand could immediately launch the marketplaces, and indeed the entire individual insurance market, into chaos without Congress having to take any further action. This has been described as the nuclear option for ending the ACA. If the Trump administration cut off the CSR payments, either as part of a settlement or simply as a policy decision (which may require a rule change and thus a delay), one of four things could happen:

Insurers Continue Cost-Sharing Reduction For Enrollees On Their Own

The insurers would continue to reduce cost sharing for eligible enrollees, as they are required to do by ACA. The Congressional Budget Office estimates that these reductions will cost $9 billion for 2017. If the CSR payments were cut off early in the year, most of this cost would fall on the insurers. This cost was not taken into account when the insurers established their premiums for 2017 and would result in billions of dollars in unanticipated losses for insurers over 2017, possibly driving some of them into insolvency. A number of the insurers would likely sue in the Court of Claims raising statutory, contractual, and constitutional claims and could well win, but not until the damage had been done to insurance markets.

Insurers Attempt To Withdraw From Marketplaces

Insurers could attempt to withdraw from the marketplaces. They might arguably be able to do this under their 2017 marketplace contract, but whether or not insurers could withdraw may also depend on state law. Enrollees whose insurer left the marketplace could try to find an insurer willing to continue to provide cost-sharing reductions in the marketplace without reimbursement, but it is unlikely any insurer would remain and pick up at its own cost enrollees from other insurers. Insurers would not be able to cancel their contracts with enrollees because of the guaranteed issue and renewal requirements of the ACA and state law. But enrollees who stuck with insurers who withdrew from the marketplace would have to continue their coverage without premium tax credits, which are not available outside the marketplace.

Many enrollees would not be able to afford the full premium and would probably be terminated for nonpayment. What exactly the insurers would have to do to terminate coverage for enrollees who did not pay the full premium would depend on state law, which would take some time to sort out. The terminations would likely include most enrollees who are eligible for premium tax credits, not just those who are eligible for CSRs, since the withdrawal of insurers from the marketplace would affect all of their marketplace enrollees.

The New Administration Attempts To Release Insurers From Obligation To Reduce Cost Sharing

The Trump administration could announce that insurers could stop reducing cost sharing for low-income enrollees once the insurers no longer received CSR reimbursement payments. Such a proclamation would be illegal as the ACA imposes an unequivocal mandate on the insurers to reduce cost sharing for eligible individuals. It would likely lead to litigation by consumers, who could seek a nationwide injunction blocking the administration from implementing its policy. Until such an injunction went into effect, however, millions of low-income Americans would lose access to health care, which would be simply unaffordable without the CSRs.

Insurers Attempt To Raise Rates Mid-Year To Cover Cost Sharing Reduction

Insurers could continue to reduce cost-sharing and try to raise their rates mid-year to cover their losses. They would probably not be able to do this in most, perhaps all, states. If they were able to do so, they would likely have to raise their rates across the individual market, since it is a single risk pool. This would drive many enrollees out of the market.

As a practical matter, most people covered by the cost-sharing reductions cannot afford the additional cost-sharing they would incur were the reductions to disappear. Many would simply cancel their insurance and avoid seeking health care. Some of them would die or face serious deterioration of chronic conditions. But others would show up in hospital emergency rooms and become bad debt or uncompensated care.

If cost-sharing reductions were eliminated or insurers are forced to cancel coverage for millions of Americans, hospitals and safety-net providers would have to pick up much of the burden of those left uninsured. Hospitals agreed to Medicare and Medicaid cuts when the ACA was adopted because they anticipated that much of their uncompensated care burden would be picked up by the ACA coverage expansions. Hospitals would face a large additional financial burden, and some hospitals, probably particularly rural hospitals, would likely have to close.

Although discussions are apparently underway between the Trump administration and the House, it is not obvious that the administration would want to abandon this appeal. Doing so would leave on the books a strong precedent for allowing a single house of Congress to sue the president any time it disagrees with the administration’s position on an appropriations issue. President-elect Trump cannot guarantee that both houses of Congress will always be friendly and might not welcome such a precedent.

A Simple And Responsible Solution

Assuming, however, that a settlement is in the offing, Congress could consider a simple solution to this issue that would not launch health insurance markets into chaos long before it can come up with an ACA replacement plan. The House’s objection has not been to the CSRs as such, but rather to the administration reimbursing insurers for them without an explicit annual appropriation.

Congress could simply appropriate payments for the CSRs and dismiss the House lawsuit as moot. (Indeed, it could appropriate funds for 2017 and 2018. Just appropriating funds for 2017 would only delay the crisis for a few months, as insurers would be reluctant to sign up for 2018 if they were not assured that funds would be available for the CSRs.) The House might be able to preserve its favorable district court precedent and put off the problem of replacement until it has a replacement plan.

Because the alternative would be irresponsible, in my opinion, people signing up for coverage now should continue to do so, confident that the House will either appropriate the funds for CSRs or find some other way to dispose of this issue without destroying the individual insurance market. In any event, if the House’s motion is granted, the district court’s stay remains in effect and insurers will continue to be reimbursed for the CSRs until the appellate court takes further action.



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