President Trump's Latest Move Sets the Stage For Massive Legal Battle
President Donald Trump's move to cut off critical Obamacare subsidies will almost surely be tied up in the courts for years as Democratic-led states seek injunctions, while insurers seek to recover payments they say they’re owed.
It's impossible to predict whether a judge might order the administration to continue the payments while the lawsuits are heard, but at least some legal experts express doubts.
“Forcing an administration to continue making payments when the president believes there is no appropriation, and when Congress believes there’s no appropriation, would be a pretty extreme move by the court — even if it was a temporary measure," said Nicholas Bagley, a professor at the University of Michigan Law School who has written extensively about Obamacare legal issues.
The result is that consumers are likely to be caught holding the bag if their insurers bolt and their Obamacare markets teeter on the verge of collapse. Many will end up paying higher premiums to make up for the shortfall, estimated at $7 billion this year alone. And although most insurers have locked in commitments to participate in the Obamacare markets for 2018, some may re-examine those decisions.
Mike Consedine, CEO of the National Association of Insurance Commissioners, fears insurers may still flee the 2018 markets.
“The coverage map right now is by and large filled in, but it’s a pretty thin layer in most states where you have just one carrier in a lot of places,” he said. “It doesn’t take a lot of decisions to find yourself in a position where you have all or parts of states bare. ... The status quo is gone at least for the foreseeable future, and we don’t know what the world looks like.”
The subsidy payments are worth an estimated $7 billion this year and go directly to insurers to help offset out-of-pocket costs — such as co-pays and deductibles for low-income Obamacare customers. Without them, Obamacare insurers will still have to provide discounts to customers — they’ll just have to eat the added cost, which most will attempt to recover by increasing premiums.
"There are no winners," Covered California Executive Director Peter Lee said on a call with reporters Friday, anticipating insurers will drop out of some markets and consumers will be priced out of coverage. "The impact could be devastating in many markets around the country."
The ramifications for insurance markets may not be fully felt until next year, when insurers will again weigh whether to sign contracts to offer Obamacare plans for 2019.
"We’re not going to let this go without a fight,” said Colorado Lt. Gov. Donna Lynne, a Democrat running for governor next year. As of Oct. 1, Colorado insurers were locked into participating in the market for 2018, although they'll now charge higher premiums. “We are really, really concerned.”
Nineteen Democratic state attorneys general, including those from California, New York, Kentucky, Connecticut and Massachusetts, filed a lawsuit in the Northern District of California on Friday to keep the Obamacare payments flowing. They're seeking a judgment that the subsidy payments are lawful — and a broader injunction to keep the subsidies flowing to Obamacare insurers while the lawsuit plays out.
The lawsuit will argue that Trump is violating the Administrative Procedure Act by abruptly pulling the money and refusing to faithfully execute federal law, among other arguments.
“It’s about doing what’s right by our people,” said Kentucky Attorney General Andy Beshear, a Democrat whose state has a Republican governor opposed to Obamacare.