House Prevails in Challenge to Administration’s Funding of ACA Cost-Sharing Provision
Yesterday, in a blow to the Obama Administration, the United States District Court for the District of Columbia struck down a key ACA provision designed to reduce insurance costs. Specifically, Section 1402 of the ACA requires insurers participating in the Exchanges to reduce deductibles, coinsurance, copayments, and other means of cost-sharing on qualified health plans. Rather than stick insurers with the bill, the ACA provides that the federal government will subsidize these costs (estimated at nearly $175 billion over 10 years).
Judge Rosemary M. Collyer’s opinion concluded that unlike other ACA efforts to decrease the costs of care paid by insureds, Section 1402 does not permanently appropriate funds to offset the costs associated with its cost-sharing reductions. Instead, it relies on a “current appropriation” funding structure, meaning that Congress must annually appropriate funds to cover the costs associated with the cost-sharing reductions. Since Congress has not provided current appropriations for the cost-sharing reductions, Judge Collyer concluded that the Obama Administration exceeded its constitutional authority by spending funds without proper Congressional appropriation. Accordingly, Judge Collyer enjoined the Obama Administration from spending unappropriated monies to fund reimbursements due to insurers under Section 1402.
The ultimate impact of the Court’s opinion in House of Representatives v. Burwell will not be known for some time, since Judge Collyer stayed her ruling pending a (widely anticipated) appeal to the more Administration-friendly DC Circuit. Unlike the broad-based, policy-focused objections at issue in NFIB v. Sebelius (individual mandate) and Burwell v. Hobby Lobby (contraceptive coverage mandate), this case concerns a major source of funding for the ACA’s consumer cost-saving measures. Accordingly, although its full impact is not yet certain, the case’s financial implications mean that stakeholders should closely monitor developments as the case works its way up on appeal.