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New York, Minnesota Sue Feds Over ACA Subsidy Cuts

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New York state and Minnesota allege, in a federal lawsuit filed today in New York City, that the Trump administration is wrongfully withholding more than $1 billion in public health insurance program funding.

The administration’s decision to withhold the payments from Affordable Care Act Basic Health Program plans is jeopardizing access to health care for about 800,000 people, the states say in the complaint.

The suit comes in response to the Trump administration’s decision to withhold payments from the Basic Health Program. Drafters of the Affordable Care Act created the program in an effort to let states provide subsidized insurance coverage for low-income people who earn too much to qualify for Medicaid.

(Related: PPACA: HHS Asks States to Help Think About Section 1331 Plans)

To run a Basic Health Program plan, a state needs federal funding. The state is supposed to get most of the subsidy cash the enrollees would have received if they were using Affordable Care Act advanced premium tax credit subsidies to pay for health coverage purchased through an Affordable Care Act public exchange program.

New York state and Minnesota are the only states that have set up Basic Health Program plans.

The program plans are known as the Essential Plan in New York and as MinnesotaCare in Minnesota

New York state and Minnesota are asking for declaratory and injunctive relief. They name the U.S. Department of Health and Human Services (HHS) and Acting HHS Secretary Eric Hargan as defendants.The U.S. Senate approved Alex Azar for secretary of HHS on Jan. 24.

HHS declined to comment on the lawsuit.

Cost-Sharing Reduction Subsidy Cut-Off

The Affordable Care Act premium tax credit subsidy program is supposed to help people with income equal to 138% to 400% of the federal poverty level, or from 100% to 400% of the federal poverty level in some states, pay private health insurance premiums.

The ACA cost-sharing reduction subsidy program is supposed to help exchange plan premium subsidy users with income below 250% of the federal poverty level handle the cost of plan deductibles, co-payments and other cost-sharing amounts. 

Officials in the Obama administration argued that a permanent premium subsidy appropriation in the Affordable Care Act also applies to the CSR subsidy stream.

Minnesota Attorney General Lori Swanson (Photo: Minnesota AG)

Minnesota Attorney General Lori Swanson (Photo: Minnesota AG)

House Republicans have rejected that argument, saying that the Obama administration needed congressional approval to make the CSR payments and never got it.

President Donald Trump and his administration have accepted the House Republicans’ position. In October, the Trump administration cut off the flow of CSR subsidy payments for low-income exchange plan enrollees.

HHS then informed New York and Minnesota that their Basic Health Program plans would no longer be receiving CSR payments.

New York’s Essential Health Plan has been getting about $1 billion per year. MinnesotaCare has been getting about $128 million per year.

Lawsuit Details

The lawsuit was filed by New York Attorney General Eric Schneiderman and Minnesota Attorney General Lori Swanson.

New York and Minnesota say the reasons for ending the cost-sharing reduction payment are “meritless” and shouldn’t apply to Basic Health Program plans.

“Even if Congress did not appropriate money to make CSR payments to insurers on exchanges, HHS would still be obligated to make full BHP payments—including any ‘CSR component’—under the distinct statutory framework governing the BHP,” the states say.

Although New York and Minnesota have submitted proposals to HHS that would restore the funding, HHS has “failed to respond to those well-supported proposals and instead continued its unlawful and unjustified determination to pay only a portion of the full funding owed,” according to a press release from Schneiderman’s office.

Schneiderman’s team on the lawsuit includes Elizabeth Chesler, assistant attorney general of the health care bureau; Lisa Landau, bureau chief of the health care bureau; Steven Wu, deputy solicitor general; Matthew W. Grieco, assistant solicitor general; Howard Master, senior enforcement counsel; and Eric Haren, special counsel and senior adviser.

Scott H. Ikeda and Brandon Boese are representing the Minnesota Attorney General’s Office.

— Read ACA Definitions: Enrollment Period Basics on ThinkAdvisor.

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