A federal appeals court recently allowed a coalition of more than a dozen states to intervene in a long-running lawsuit challenging the legitimacy of billions of dollars in federal subsidy payments to insurance providers. But regardless of what happens in that case, President Trump has repeatedly dangled the threat that he could pull the plug on those payments at any time. The states coalition says it is preparing for that possibility and is ready to take the White House to court if necessary.

For those who aren’t familiar, the Affordable Care Act provides for the federal government to make significant monthly payments to insurers who participate in the individual health insurance exchanges. These cost-sharing subsidies — which could total around $7 billion this year — are intended to keep out-of-pocket expenses, like co-pays and deductibles, low, particularly for Americans making between 100% and 250% of the federal poverty line.

In addition to the now three-year-old legal challenge brought by House Republicans, who accuse President Obama of overstepping his authority in allowing these subsidies, the Trump administration has repeatedly, and publicly, reminded the insurance industry that it can cut off these payments, which the President has dubbed “bailouts,” whenever it chooses.

Most recently, after the Senate failed to pass any Obamacare repeal or replacement legislation, President Trump Tweeted that, “If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!”

This morning, Office of Management and Budget director Mick Mulvaney did little to walk back that threat, telling CNN that “We said from the very beginning that we would look at [subsidies] on a month-by-month basis… That has not changed.”

Whatever one thinks of the subsidies, there is no argument that ending the payments — while still requiring insurers to cover a large variety of essential health benefits and not allowing them to charge higher premiums, or deny policies, to Americans with pre-existing conditions — would likely have devastating results. It’s largely expected that insurers would raise premiums by at least 20% and many providers would leave the individual market entirely.

This afternoon, New York Attorney General Eric Schneiderman, who is leading the multi-state coalition intervening in the lawsuit over these subsidies, said the same states will do “whatever we have to” to make sure the subsidies continue.

“If the Trump administration attempts to stop payments, we will challenge them in court,” explained Schneiderman.

Mulvaney and Trump have repeatedly made the claim that the White House has the authority to cut off the ACA subsidy firehose whenever it wants. However, Schneiderman counters that this doesn’t seem to be the opinion of the D.C. Circuit Court of Appeals.

Last night, in its order granting the states’ request to intervene in the subsidy lawsuit, the appeals panel cast some doubt on the administration’s ability to turn the payments on and off, calling it a “debated legal question,” rather than an established fact.

So if Trump does move to stop the payments, would the states be able to seek an injunction as part of the pending lawsuit, or would they have to file a separate action?

Schneiderman said that all “depends on the exact nature of the action” taken by the Trump administration. The President’s statements on the topic, particularly on social media, have been “all over the place” according to Schneiderman, so it’s a little hard to predict how and when the White House might make a move. “We have to tailor our response depending on the exact nature of the attack.”

As the New York AG pointed out, a decision to end these insurance subsidies would likely result in legal challenges from a variety of interested parties who could be injured by the collapse of the individual market: states, insurance companies, healthcare providers, consumers.

“He’s not gonna get away with this without a challenge,” said Schneiderman, “and there may be multiple challenges in multiple courts.”

The subsidies are likely to be a big part of any bipartisan discussion that occurs in Congress about reforming the current healthcare law.

“The first bill that we should consider is how to stabilize the market,” said Sen. Susan Collins of Maine, one of the three GOP votes against the latest repeal-and-replace efforts. “That is a key component to ensure that those payments continue to be made to benefit low-income Americans.”

The Senate Health, Education, Labor & Pensions (HELP) Committee has already scheduled a hearing on Sept. 4 on what must be done to stabilize the currently volatile individual market.

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