WASHINGTON – The Trump administration informed a federal appeals court on Friday that the government would immediately halt payments to insurers that help millions of lower-income Americans afford coverage under the Affordable Care Act, formalizing a decision that could upend individual insurance markets across the country.
In the filing to the U.S. Court of Appeals for the D.C. Circuit, officials wrote that the Health and Human Services Department has stopped what's known as cost-sharing reduction payments, which help offset deductibles and other out-of-pocket costs for roughly 7 million Americans. The payments were stopped, the filing said, because they were not formally appropriated by Congress.
The documents include an Oct. 11 legal opinion from Attorney General Jeff Sessions, informing HHS and the Treasury Department that he believes "the best interpretation of the law" indicates that money appropriated to HHS "cannot be used to fund" the subsidies.
Trump decided on Wednesday to cut off the payments – which were expected to total about $7 billion this year – after months of threatening that action. Officials will not make an upcoming payment to insurers scheduled for Oct. 18, the filing states.
According to two individuals briefed on the matter, the president held off on a final decision as other administration officials warned that such a move would cause the ACA marketplaces to implode – with Republicans then blamed for resulting problems.
Health insurers and state regulators have been in a state of high anxiety over the prospect of the marketplaces cratering because of this very action. The fifth year's open-enrollment season for consumers to buy coverage through ACA exchanges will start in less than three weeks, and insurers have said that stopping the cost-sharing payments would be the single greatest step the Trump administration could take to damage the marketplaces and the law.
Ending the CSRs, as they're called, is grounds for any insurer to back out of its federal contract to sell health plans for 2018. Some states' regulators directed ACA insurers to add a surcharge in case the payments were not made, but insurers elsewhere could be left in a position in which they still must give consumers the discounts but not be reimbursed.
On Friday morning, the America's Health Insurance Plans and the Blue Cross Blue Shield Association, the two main trade groups from the health insurance industry, issued a rare joint statement saying "there will be real consequences" to ending the payments.
The groups called the subsidies "critical" and said their elimination will shrink consumers' choice of insurance, raise costs and destabilize the ACA marketplaces.
"We are committed to pursue every possible path to ensure that all Americans who depend on these benefits can continue to get the care they need when they need it," they said.
Other parts of the health-care industry also began to register their alarm.
The American Medical Association said in a statement that it "is deeply discouraged by the administration's decision last night to end the cost sharing reduction payments to insurers." The association urged Congress to "accelerate" its efforts to "reinstate these payments before further damage is done," saying that halting the payments so close to the start of the ACA enrollment period creates "more uncertainty . . . further undermining the law and threatening access to meaningful health insurance coverage for millions of Americans."
The subsidies have long been the subject of a political and legal seesaw. Republicans in Congress argued that the sprawling 2010 health-care law that established them does not include specific language providing appropriations to cover the government's cost. House Republicans sued HHS over the payments during President Barack Obama's second term. A federal court agreed that they were illegal, and the case has been pending before the D.C. Circuit.
House Speaker Paul D. Ryan, R-Wis., said in a statement that the Trump administration was dropping its appeal of the lawsuit – something the White House did not mention in an announcement late Thursday. Ryan called the move to end to the court case "a monumental affirmation of Congress's authority and the separation of powers."
Administration officials did not confirm in the court filing that they were withdrawing the suit. Instead, they stated, "The Executive Branch will confer with the other parties about this development and proposes that the parties make submissions to govern proceedings by the time of the status update presently scheduled for October 30."
The cost-sharing payments are separate from a different subsidy that provides federal assistance with premiums to more than four-fifths of the 10 million Americans with ACA coverage. But insurers and state officials warn that cutting off the payments will disrupt coverage for many Americans who rely on this assistance.
The move to cut off the subsidies will trigger a new round of litigation: California Attorney General Xavier Becerra, D, announced Thursday that he is prepared to go to court to preserve the payments, and other attorneys general are poised to join him.
Becerra will challenge the administration's move on multiple grounds, according to an aide who spoke on the condition of anonymity because the suit has yet to be filed. These include the fact that it violates the Administrative Procedure Act, which requires that agencies must follow orderly and transparent procedures if they wish to change course, and that it violates the Take Care Clause that mandates under the Constitution that the president take care to faithfully execute the law.
California has legal standing to challenge the cutoff in payments, Becerra will argue, because the state will shoulder additional costs as a result of the action and its health-care system will be strained by the destabilization of its insurance market.
While both White House and HHS officials said Thursday that Congress can choose to appropriate the cost-sharing payments if they wish, such a proposal would face fierce resistance from many Republicans on Capitol Hill.
Rep. Tom Cole, R-Okla., who chairs the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, said in a recent interview that while his "personal position is they still should be made," he understood the administration's legal quandary and thought it was unlikely the majority of his colleagues would vote to fund them on their own.
"I don't have much confidence that you can pass them through an appropriations process," he said, adding that many GOP lawmakers are loathe to take any action that could help sustain the ACA. "I think Democrats are naive on this if they think Republicans are all of a sudden going to vote in significant numbers to sustain a system that none of them have voted for."
In an early morning tweet Friday, however, Trump reached out to Democrats with an appeal to somehow work together on a health-care "fix."
"The Democrats Obamacare is imploding," Trump wrote. "Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!"
And he suggested that even without their cooperation, he would dismantle it over time.
"Obamacare is a broken mess," he tweeted. "Piece by piece we will now begin the process of giving America the great HealthCare it deserves!"
The Washington Post's Ann E. Marimow contributed to this report.