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Life Health > Health Insurance

Court ruling threatens $5 billion in PPACA insurer subsidy payments

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A U.S. District Court judge today issued a ruling that could block the operation of the Patient Protection and Affordable Care Act (PPACA) cost-sharing reduction subsidy program.

The program helps PPACA public exchange plan users with income under 250 percent of the federal poverty level pay the plan deductibles, coinsurance amounts and co-payments.

Judge Rosemary Collyer has ruled, in House vs. Burwell (Case Number 14-1967), that the U.S. Department of Health and Human Services (HHS) needs to get a current appropriation approval from Congress before it can send cost-sharing reduction subsidy money to health insurers.

Collyer says her court will enter a judgment in favor of the U.S. House and enjoin use of unappropriated moneys to make cost-sharing reduction payments.

“The court will stay its injunction, however, pending appeal by either or both parties,” Collyer says.

For information about how the appeals process might play out, see Obama Administration Unlawfully Reimbursed Health Insurers, Judge Rules, an article by Zoe Tillman of The National Law Journal, a member of the same family of publications that owns

When Congress drafted PPACA, it added funding for the premium tax credit subsidy program, which was described in PPACA Section 1401, to a list of tax provisions with permanent appropriations. Congress did not explicitly add the cost-sharing reduction program, which was described in PPACA Section 1402, to the list of programs with permanent appropriations, Collyer says.

Collyer, who refers to PPACA using the acronym ACA, writes in an opinion discussing the ruling that HHS Secretary Sylvia Burwell and other Obama administration officials responsible for administering the cost-sharing reduction program face “a failure to appropriate, not a failure of drafting.”

“Congress’s subsequent inaction, not the text of the ACA, is what prompts the secretaries to force the elephant into the mousehole,” Collyer writes. “There are no inherent flaws in the ACA that keep Section 1402 payments from being paid, in advance or otherwise.”

Obama administration officials have argued that failing to make cost-sharing reduction subsidy payments would lead to nonsensical and undesirable results that are clearly in conflict with the goals of PPACA’s drafters.

Collyer acknowledges that insurers might sue HHS if the government fails to make cost-sharing reduction program payments, but she says insurers can avoid undesirable effects by increasing their premiums. In that case, she says, insurers would get the additional cash needed to make the coverage work from the premium tax credit program rather than the cost-sharing reduction program. Collyer argued that the administration has been looking at the wrong questions in connection with an analysis of absurd outcomes, and that the U.S. Government Accountability Office has consistently emphasized that all appropriations, and, especially, permanent appropriations, must be expressly stated.

Collyer does not appear to apply her ruling retroactively, to payments already made, and it’s not clear how her ruling would affect subsidy payments scheduled to be made while the ruling is under appeal.

Congressional Budget Office (CBO) analysts have estimated that HHS owed insurers about $5 billion in cost-sharing reduction subsidies for 2015, and CBO analysts are predicting that cost-sharing reduction program outlays will increase this year and in later years.

HHS has already paid about $5 billion in cost-sharing reduction subsidy money to insurers, and 

In many states, health insurers are filing initial rate proposals for 2017 individual health coverage this week. Insurers that want to sell coverage through the PPACA exchange system in 2017 have included assumptions about cost-sharing reduction subsidies in their 2017 rate proposals.

Marilyn Tavenner, the president of America’s Health Insurance Plans (AHIP), said in a statement that a long judicial process lies ahead before a final decision will be made.

“Our members’ focus is and will remain on serving consumers: to ensure their coverage is protected and their health care choices are maintained,” Tavenner said in the statement.

This story has been updated after publication with the AHIP comment and additional background.

See also:

House panels subpoena documents on $5 billion in PPACA insurer payments

Another PPACA subsidy system takes shape


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