Health and Science

White House to pay insurers while Obamacare case kept on ice: Sources

Key Points
  • The Justice Department and House will ask a federal appeals court to put the case on hold
  • During that time, the Trump administration will continue paying insurers for cost-sharing subsidies for their Obamacare customers.
  • Uncertainty over the subsidies has led some insurers already to request higher prices next year.
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The House of Representatives and Department of Justice plan to ask the District of Columbia federal appeals court Monday to keep on hold for another 90 days a lawsuit that questions the legality of cost-sharing subsidies in the Affordable Care Act, according to four people familiar with the matter.

The White House, during that time, will continue to make payments to insurers, according to a senior administration official.

The payments, called "cost-sharing reductions," represent billions of dollars annually to the insurance industry to offset plans for low-income participants on the ACA exchanges.

Insurers intending to offer plans on Obamacare exchanges in 2018 must submit their proposed pricing in the coming days and weeks.

If the executive branch had decided Monday to drop its defense of the case — which would then let stand a federal judge's decision that the payments to insurers were illegal — insurers were expected to request even higher premium rates for Obamacare health plans next year than they otherwise would have.

However, the delay in resolving the case will continue uncertainty over the fate of the cost-sharing subsidies, which also could cause insurers to price plans higher to reflect the chance the money might go away by next year.

The dispute relates to the ACA's requirement that insurers offer lower-income Obamacare customers reduced charges for out-of-pocket health expenses, including copayments, deductibles and coinsurance. Insurers offer those discounts up front, but then expect to be reimbursed for them by the federal government.

A federal district court judge had previously ruled in favor of House Republicans, who in 2014 sued over billions of dollars in payments to insurance companies under the Affordable Care Act because they had not been granted via a congressional appropriation. The Obama administration appealed the case, and the Trump administration asked to put the case on hold while it established its position on the matter.

In February, the judge requested the two parties to submit status reports every 90 days beginning Monday.

The expected request for a delay would give the parties an additional 90 days to decide how to proceed in the case.

"If the administration seeks a delay on Monday, presumably they would continue to pay the cost-sharing reductions but they don't have to actively defend the lawsuit in the short term," said Chiquita Brooks-Lasure, a managing director at Manatt Health, who as an Obama administration official played a key role in implementing Obamacare.

The White House had told congressional leaders it would make the monthly payment for May, which were due on May 19, but had stayed mum on payments thereafter. Next month's payment is due June 20.

President Donald Trump reserves the right to unilaterally cut off the payments, made monthly by the Department of Health and Human Services, if he disagrees with a recommendation to do otherwise.

In an interview with The Economist on May 4, Trump weighed that option publicly, saying: "You know when people say, 'Oh, Obamacare is so wonderful,' there is no Obamacare, it's dead. Plus we're subsidising it and we don't have to subsidise it. You know if I ever stop wanting to pay the subsidies, which I will."

With passage of any new health-care legislation still months away, a senior administration official and four people familiar with the case expect the parties on Monday will suggest keeping the lawsuit on ice.

The implications of the case for the insurance industry could be costly. The Congressional Budget Office estimated the Department of Health and Human Services would pay some $7 billion in subsidies — technically termed "cost-sharing reductions" — and that total would rise to $16 billion by 2027.

Democratic attorneys general and eight health-care industry groups have voiced concerns in the days leading up to Monday's deadline.

A joint letter sent to Senate leadership by the industry groups — spearheaded by America's Health Insurance Plans acknowledges that the Senate is working toward a legislative solution but asks for stability in the intervening months. "Unless CSRs are funded, a tremendous number of Americans will simply go without coverage and move to the ranks of the uninsured," the groups wrote.

The civil division of the Department of Justice and the House of Representatives general counsel's office declined to comment. The Department of Health and Human Services did not respond to multiple requests for comment. The White House Press Office did not respond within deadline.