House Republicans Win Challenge to ACA Cost-Sharing Subsidies

by King & Spalding
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On May 12, 2016, the U.S. District Court in Washington, D.C. ruled in favor of House Republicans, concluding that the government wrongly spent billions reimbursing insurance companies for providing discounted health coverage to low-income Americans under the Affordable Care Act (ACA).  The District Court held that the appropriation of funds to pay cost-sharing subsidies to health insurers under Section 1402 of the ACA was never approved by Congress and that it was unlawful for the government to pay subsidies under such circumstances.

At issue in this case were Sections 1401 and 1402 of the ACA.  Section 1401 provides tax credits to make insurance premiums more affordable.  Section 1402 reduces deductibles, co-pays, and other means of “cost sharing” by insurers to low- and moderate-income consumers for policies obtained on the ACA exchanges.  Under Section 1402, insurance companies are reimbursed with federal funds for these cost-sharing arrangements.  In its ruling, the Court held Section 1402 to be unconstitutional because Congress did not approve the appropriation of funds for such a purpose.  As the Court explained, “[p]aying out reimbursement [to insurers] without an violates the Constitution.  Congress authorized reduced cost-sharing but did not appropriate monies for it, in the FY 2014 budget or since.  Congress is the only source for such an appropriation, and no public money can be spent without one.”  The Court enjoined any further reimbursements under Section 1402, but stayed its ruling pending review by the D.C. Court of Appeals.

The Court, however, ruled otherwise on Section 1401, holding that spending for the tax credits to consumers was authorized by a permanent Congressional appropriation measure. The Court stated that because the ACA “unambiguously appropriates money for Section 1401 premium tax credits” it should be allowed to continue.

The case is U.S. House of Representatives v. Burwell et al., CV 14-1967 (RMC), 2016 WL 2750934 (D.D.C. May 12, 2016).  For the full District Court opinion, click here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822, klucas@kslaw.com.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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