Federal ruling says U.S. can’t just stop cost-sharing subsidies

WASHINGTON — A federal court ruled this month that a Montana insurer is entitled to federal compensation for subsidy payments under the Affordable Care Act that President Donald Trump abruptly ended last October, a ruling that could reverberate through insurance markets and cost the government hundreds of millions of dollars.

At issue are cost-sharing reductions, discounts that enhanced the value of health insurance policies purchased from the Affordable Care Act’s marketplaces by reducing deductibles, copayments and other out-of-pocket costs for low-income consumers. Trump ended them in October, one of a series of executive actions that he said would “gut” President Barack Obama’s signature domestic achievement by destabilizing the law’s marketplaces and sending premiums higher.

But Judge Elaine D. Kaplan of the U.S. Court of Federal Claims said this month that Trump’s actions violated a government promise to insurance companies participating in the health law. Although Congress never explicitly provided money for the subsidies, the court said, the government had a legal obligation to pay them.

“The statutory language clearly and unambiguously imposes an obligation” on the government to reimburse insurers for the discounts they were required to provide to low- and middle-income people, Kaplan said in her decision.

The decision could have broad ramifications for health insurers. Several similar cases are pending in the Court of Federal Claims, a specialized tribunal that handles a wide range of monetary claims against the government. In April, another judge, Margaret M. Sweeney, certified a class action that allows insurers as a group to sue the government over Trump’s termination of the cost-sharing payments.

Dozens of insurers of all sizes have joined the class-action lawsuit, filed originally by Common Ground Healthcare Cooperative of Wisconsin.

The case decided by Kaplan was filed by the Montana Health Co-op, which sells coverage on the federal insurance exchange created under the 2010 health law. The company received cost-sharing reduction payments from the government for 45 straight months, until Trump ended them last year. Trump was frustrated over the failure of Congress to repeal the Affordable Care Act, and he denounced the cost-sharing payments as a “bailout of insurance companies.”

Montana Health said it was entitled to $5.3 million for the final months of 2017. Kaplan’s decision allows the insurer to obtain the money from a special account known as the Judgment Fund, created by Congress to pay certain claims against the government.

Federal officials defended Trump’s decision to halt the subsidy payments, saying Congress did not intend to fund them. But the administration has not said whether it will appeal the court ruling.

Kaplan said the question of the government’s legal responsibility, or liability, for the payments was separate from the question of whether Congress had provided money for them.

The Affordable Care Act, she said, is clear. It says that the secretary of health and human services “shall make periodic and timely payments” to insurers equal to the value of the cost-sharing reductions they give consumers.

In decisions stretching back more than a century, she said, courts have held that the government may sometimes incur a “statutory payment obligation” even when Congress has not specifically provided money to meet that commitment.

“The government violated a statutory obligation created by Congress in the Affordable Care Act when it failed to provide Montana Health its full cost-sharing reduction payments for 2017,” Kaplan said, and Congress’ failure to appropriate funds does not wipe out that obligation.

The next open enrollment period, when people can sign up for coverage under the Affordable Care Act or switch plans, starts in a few weeks, on Nov. 1, and continues through Dec. 15. Consumers in many states will see smaller increases in premiums than in prior years, and in some cases they will see rates come down, as insurers say they have already accounted for most of the disruption to the Affordable Care Act marketplace caused by Trump and Republicans in Congress.