Appeals Court Will Let States Defend Obamacare Subsidies That White House Likely Won’t

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A federal appeals court has granted a request from 16 attorneys general to allow them to intervene in a long-running legal challenge to billions of dollars in federal subsidies provided by the Affordable Care Act.

These subsidies — totaling around $7 billion this year alone — are provided to insurance companies on the individual market to reduce policyholders’ out-of-pocket costs like co-payments and deductibles. In 2014, Republican-controlled House of Representatives sued the U.S. Department of Health and Human Services over these subsidies, arguing that Congress had not properly authorized these payments.

The federal court judge agreed in July 2016, but allowed the subsidies to continue pending approval. The case has effectively been on hold since Donald Trump stepped into the Oval Office.

In addition to its vocal support of legislative efforts to undo the Affordable Care Act, the Trump administration has repeatedly threatened to halt these subsidies to insurance companies. Both the President and several conservative lawmakers have referred to the payments as a “bailout” for insurers.

The insurance industry has maintained that uncertainty about these subsidies — Will the House lawsuit prevail? Will the White House pull the plug? — has contributed to higher premiums, and that cutting the payments while keeping the Affordable Care Act’s coverage requirements would result in even higher rates and additional insurers fleeing the individual market.

Given the administration’s open distaste for the subsidies, several states have argued that the White House will not put up an adequate (if any) defense to the House legal challenge. That’s why the attorneys general for 15 states and D.C. filed their motion to intervene, hoping to be named a party to the lawsuit and allowing them to, if needed, defend the subsidies.

Late on Tuesday, the Court of Appeals for the D.C. Circuit granted that motion [PDF], finding that the states have standing to intervene because they demonstrated they “would suffer concrete injury” if the House succeeded in gutting the payments, which could lead “directly and imminently to an increase in insurance prices,” and therefore a significant uptick in the number of uninsured in these states.

Of course, the states have faced this potential risk for several years. What makes things different now — and one of the reasons the court granted the motion to intervene — is the question of whether the Trump administration, through the Department of Health and Human Services, would represent the states’ interests.

“Indeed, the Department nowhere argues in its intervention papers that it will adequately protect the States’ interests or even continue to prosecute the appeal,” notes the appeals court. “Such equivocation about whether the Department will continue to appeal the adverse ruling of the district court or will otherwise protect the intervenors’ interests constitutes at least the requisite minimal showing that the Department’s representation of the States’ interest may be inadequate.”

“It’s disturbingly clear that President Trump and his administration are willing to treat them as political pawns,” said New York Attorney General Eric Schneiderman, who is leading the state coalition with California’s Xavier Becerra, “but this coalition of attorneys general stands ready to defend these vital subsidies and the quality, affordable health care they ensure for millions of families across the country.”

In addition to New York and California, the other states intervening in the lawsuit are Connecticut, Delaware, Hawaii, Illinois, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, Pennsylvania, Vermont, Washington, and the District of Columbia.

For now, the appeal remains on hold, with parties still meeting every 90 days to chit-chat. Meanwhile, insurance rates continue to climb.

Insurers are currently going through the process of setting individual plan rates for 2018. The GOP fell short of passing a legislative repeal of the Affordable Care Act, but the lack of certainty about the future appears to still be pushing rates higher.

Today, Covered California — the state’s healthcare exchange — issued proposed increases for next years, and patients who remain on their individual plan through the marketplace will see an average premium increase of around 12.5%. Those who shop around may be able to find lower premiums. Some in the state may have no choice but to look for new insurance, as Anthem, one of the nation’s largest insurers, is pulling out of several areas in California.

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