A federal judge ruled today that the Trump administration can stop making Affordable Care Act cost-sharing reduction (CSR) subsidy payments while he is considering a state effort to keep the program in place.

U.S. District Judge Vince Chhabria denied a request by California and 18 other jurisdictions for a restraining order that would preserve the CSR subsidy payment stream.

But Chhabria suggested, in a footnote, that insurers may still have a chance to recover the $1 billion in CSR subsidy payments that they were expecting to collect from the program for rest of this year.

“Although they are recouping the lost CSR payments through 2018 premium increases, it appears those increases don’t compensate for the missed payments in October, November and December of 2017,” Chhabria writes in a footnote in an opinion explaining the ruling.

(Related: Judge Seems Likely to Turn Back States’ ACA Subsidy Injunction Bid)

Chhabria said he will not issue a restraining order to protect the insurers from harm as a result of the mid-year halt in CSR payments, because “financial harm is almost never irreparable harm.”

“The insurance companies could presumably recover that money once this case is over, if not through a judgment by this court, then through lawsuits brought under the Tucker Act,” Chhabria writes.

The court has posted a collection of documents related to the case, State of California et al. v. Donald J. Trump et al., and a video recording of a hearing that took place on Monday, here.

CSR Subsidy Program Basics

The drafters of the Affordable Care Act created the Affordable Care Act public exchange plan system to give people a way to shop for health insurance from commercial insurers on an apples-to-apples basis, and to create a vehicle for distributing health insurance subsidies.

One program, the advance premium tax credit program, helps exchange users with income from 100% to 400% of the federal poverty level, or from 138% to 400% of the federal poverty level in some states, to pay exchange plan premiums.

The CSR subsidy program helps exchange plan users with income under 250% of the federal poverty level pay their plan deductibles, co-payments and coinsurance amounts.

The states, and the administration of former President Barack Obama, have argued that the same permanent Affordable Care Act appropriation that funds the advance premium tax credit subsidy program also funds the cost-sharing reduction subsidy program, because both programs are two sides of the same coin.

(Image: iStock)

(Image: iStock)

Republicans in the House have argued that the federal government has no valid congressional appropriation it can use to make the payments. Trump administration officials now say their lawyers agree with that position. Administration officials say they believe they have no legal basis for continuing to make the payments.


What the Judge Says

The judge notes in his order denying the request for an injunction that, to prevail, the states would have had to make the case that a sudden end to the CSR subsidy payments would cause immediate harm to state residents, and also that the states had a good chance of winning in court, based on their legal arguments.

Chhabria, an Obama nominee, writes that both sides appear to have reasonable arguments on the legal issues.

“However, with the important caveats that the court has only been given a few days to study this complex matter and the states may not have fully developed all arguments, it initially appears the administration has the stronger legal position,” Chhabria writes.

The drafters of the Affordable Care Act appear to refer to the advance premium tax credit and CSR subsidy programs together many times, in a way that suggests that the drafters saw the programs as related but separate programs, Chhabria writes.

Chhabria also questions the idea that the end to the CSR subsidy payment stream will cause immediate, irreparable harm to consumers.

Individual major medical open enrollment for 2018 is set to start Nov. 1.

Most of the states involved in the litigation seem to have made adjustments to 2018 plans and rates that will keep the elimination of the CSR payment stream from having much direct effect on typical enrollees, Chhabria writes.

Chhabria does not appear to address the possibility that the mid-year cut-off this year could affect health plans, and health coverage, in ways that would cause immediate, irreparable harm to people seeking medical care, or to the doctors and hospitals that want to provide care for those people. 

—-Read We Planned for 2018 ACA Subsidy Changes: Centene on ThinkAdvisor.


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