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

De­ci­sion could cost gov­ern­ment hun­dreds of mil­lions of dol­lars.

Austin American-Statesman Sunday - - NATION & WORLD - Robert Pear

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.

In­sur­ers do not like the changes in fed­eral law and pol­icy, which ended the cost-shar­ing pay­ments and the man­date for peo­ple to have in­surance. But those changes re­duced un­cer­tainty about the gov­ern­ment’s in­ten­tions, mak­ing it eas­ier for in­sur­ers and ac­tu­ar­ies to pre­dict costs and set rates for 2019.

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