Source: https://www.faegrebd.com/en/insights/publications/2017/8/what-can-health-plans-do-if-the-trump-administration-stops-making-csr-payments
Timestamp: 2019-04-19 01:25:09+00:00

Document:
Amid assertions that the Affordable Care Act (ACA) should be allowed to fail, the Trump administration has indicated that it may stop paying subsidies that are central to ACA markets. At the core of these subsidies are cost-sharing reduction (CSR) payments, which are intended to help the lower-income insured population defray out-of-pocket costs. Under Section 1402 of the ACA, Qualified Health Plan (QHP) issuers are required to provide these cost reductions to eligible members, and the federal government reimburses the QHP for these reductions, which the government has been doing on a monthly basis since the opening of the health insurance exchanges in January 2014.
The way Section 1402 has been interpreted, the QHP issuers must provide the reductions even if the government fails to provide the reimbursement. Given the amount that this program costs QHP issuers, if the administration stops payments, it will impact the ACA markets to the tune of an estimated $7 billion. Actuaries project that insurers would have to raise their rates 20-25 percent or exit the exchanges to make up for the loss of subsidies in 2018. However, a Trump administration decision to cut subsidy funding could begin immediately, inflicting immediate losses on insurers that could not be recovered by raising rates next year. The next opportunity to withhold a monthly payment comes on or about August 20, when insurers will expect payment for providing health care for low-income members for the month.
Adding to the challenges for QHP issuers, in the May 12, 2016, opinion in House v. Burwell (now House v. Price), the District Court for the District of Columbia held that the Obama and now Trump administrations’ payments to QHP issuers under Section 1402 are unconstitutional under the Appropriations Clause. Despite mandatory language in Section 1402 that “the Secretary [of Health and Human Services] shall make periodic and timely [CSR] payments to the issuer equal to the value of the reductions,” Congress never provided an appropriation for the payments, and therefore, in the court’s view, the Secretary lacked constitutional authority to make them. Nevertheless, the court stayed its opinion pending appeal, and the parties have since allowed the payments to continue for the time being. To date, the Trump administration has put off making a long-term decision on paying the CSRs, presenting to the court that expected congressional action might make the matter moot. But in light of the Senate’s inability last week to advance ACA repeal legislation, short-term congressional action is now unlikely.
This leaves QHP issuers in a quandary: if the administration stops making the payments, do the issuers have a legal remedy to recoup them? The easiest avenue is for Congress to appropriate funds for the subsidies. Absent this outcome, another avenue would be to have the district court’s decision overturned. In that case, given the obligatory nature of Section 1402, the QHP issuers would have a relatively clean shot at obtaining a court order requiring the Secretary to resume payments. Such an outcome, however, would be surprising, given that the administration is not likely to both stop payment and pursue an appeal of the decision, which might then require the Secretary to resume payments.
But that does not necessarily mean that QHP issuers have no recourse. There is a third avenue whereby QHP issuers could successfully seek a judicial remedy, even if the House v. Burwell opinion is left intact. The key difference is the context of the lawsuit. In House v. Burwell, one branch of government (legislative) was challenging the constitutional authority of another branch of government (executive). But a different legal construct governs claims of a private party against the government as a whole—the United States. In this context, Congress has—through the Tucker Act—created a vehicle for private parties to hold the government liable for money damages arising from its failure to meet its statutory and contractual obligations. The court in House v. Burwell expressly noted that such Tucker Act claims may be available in spite of its opinion, but it declined to decide the merits of such claims. So that legal avenue remains open, albeit undecided.
Moreover, beyond Section 1402, QHP issuers may have viable contract claims given the structure of the ACA marketplaces and the terms in the QHP certification agreements that specifically address CSR payments. For example, the 2017 QHP agreement anticipated the advance payments of CSRs, contemplated offsets of CSR payments to amounts that QHP issuers owed CMS, and acknowledged that QHP issuers were designing their products on the basis of CSR payments being available.
For its part, the government would likely defend against such claims as it did in House v. Burwell; namely, that the lack of an appropriation for the payment precludes the administration from making it. But the QHP issuers have arguments here as well. Congress has, through the Judgment Fund, created a permanent appropriation to assure payment of court judgments issued against the government. Indeed, failure to make a court-ordered payment to cover the judgment would leave Congress in an extremely awkward position—one that, to our knowledge, has not happened in modern U.S. history—with potential longer-term impacts to the willingness of private parties to participate in government funded programs.
Moreover, some of these issues may get sorted out in the currently pending risk corridors cases. In those cases, the government is arguing that the failure of Congress to appropriate funds for risk corridors payments precludes both a) the Secretary from making “payments out” beyond whatever QHP issuers pay to the government as “payments in”; and b) QHP issuers from obtaining judicial relief entitling them to full payment. Given that some of those cases are already on appeal to the Federal Circuit, that litigation is now running ahead of House v. Burwell and could impact how courts would treat the appropriations issues likely to arise in litigation over CSR payments.
Ultimately, while an executive decision to stop CSR payments could disrupt ACA markets, it is not necessarily the end of the issue. Such a decision would most assuredly create another round of ACA litigation.

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