February 6, 2017
By Lisa Campbell and Tamara Killion*
Currently pending before the D.C. Circuit, U.S. House of Representatives v. Burwell,1 adds to the uncertainty felt by health insurance issuers and consumers alike regarding the fate of the Affordable Care Act (ACA). The case, filed in the U.S. District Court for the District of Columbia in 2014, challenged (among other things) the Department of Health and Human Services’ (HHS) payment of cost-sharing reduction (CSR) reimbursements to health insurance issuers pursuant to Section 1402 of the ACA. The CSR program provides reduced cost-sharing for eligible individuals enrolled in coverage through Exchanges. Under the program, HHS is directed to reimburse health insurance issuers for the additional cost of the CSRs. The challengers in the suit—the U.S. House of Representatives (House)—argued that Congress had not appropriated funds for the reimbursements, so any payments made by HHS to health insurance issuers were unlawful.2 The Obama administration, for its part, argued that the money was appropriated along with the premium tax credits (I.R.C. § 1324(b)).3
Initially, the case was focused on the issue of standing: could the House sue the Obama administration over what the House viewed as unconstitutional spending, and what the Obama administration viewed as a difference in statutory interpretation? In a decision in which the district court acknowledged that “there is no precedent for this specific lawsuit” and that “no precedent dictates the outcome,” the district court found that the House did indeed have standing and that HHS was spending money that had not been appropriated. The district court entered an injunction prohibiting the Obama administration from making any further CSR reimbursement payments, but stayed the injunction, pending appeal. As anticipated, the Obama administration appealed to the D.C. Circuit.
On November 21, 2016, the House requested an abeyance of the briefing scheduled for the appeal, noting that the House and the President-Elect’s transition team were discussing potential options for resolution, and the additional time would allow them to consider withdrawal or settlement of the appeal. On November 23, 2016, the U.S. Department of Justice (DOJ), on behalf of the defendants, filed a response objecting to the House’s request, arguing (among other things) that the election did not change the “separation-of-powers problems inherent with legislative standing” on which the appeal is based. The D.C. Circuit granted the abeyance, requiring the parties to file a joint status report by February 21, 2017.
On December 20, 2016, two individuals receiving CSRs filed a motion for leave to intervene. The movants argued that “[a]n agreement between the new Administration and the House to allow the District Court’s injunction to take effect—either by dismissing this appeal or by entering into a settlement providing that the injunction will take effect at some specified time in the future—will produce devastating consequences for the individuals who receive these reductions, as well as for the Nation’s health insurance and health care systems generally.” As a result, the movants argued that their interest in continued payment of the CSRs was no longer being adequately represented by the new administration and that they therefore should be allowed to intervene in the litigation.
Initially, both the House and DOJ argued that because of the abeyance, neither should be required to respond to the intervention motion. In response, the intervenors filed an emergency motion asking the court to lift the abeyance to allow the parties to respond. The D.C. Circuit ordered briefing from the parties on an expedited basis.
The House urged the court to reject the motion to intervene, stating that no emergency exists and there is no basis to lift the abeyance. Further, the House argued that the movants could not intervene “as of right” and also did not meet the criteria for permissive intervention. The DOJ, in contrast, said that “[t]here is no doubt that allowing the injunction to take effect would cause major disruption of the insurance market, but the [movants’] motion rests on speculation that such an agreement will occur” and urged the court to defer ruling on the intervention motion, or deny it as premature. On January 12, 2017 the court denied the intervention motion, stating that the intervenors “have not demonstrated that they are entitled to intervene in this case,” without additional reason for the denial.
Potential Impact of Settlement or Voluntary Dismissal
The parties are required to file a joint status report by February 21, 2017 informing the court (a) whether the parties are considering settlement or voluntary dismissal of the appeal, and if not, (b) proposing a schedule for the remainder of the briefing in this matter.
If the Trump administration decides simply to withdraw the appeal, the stay of the injunction would be lifted. Reimbursements to health insurance issuers would presumably halt, leaving health insurance issuers with unanticipated payments and possibly disincentivizing offering coverage through Exchanges. Approximately 5.9 million individuals are eligible for CSRs, which can only be received through Exchange coverage, so consumers may be concerned about the future availability of CSRs as well as Exchange coverage more generally.
Despite the ongoing lawsuit, Congress could choose to provide funds for the CSRs to avoid instability in the individual health insurance market, and some lawmakers have suggested they may be open to that possibility. Funding could be part of a Congressional appropriation, or part of any ACA “repeal and replace” package.
Regardless of the funding status of the CSRs, if the district court decision stands, there would be precedent for suits in the future between Congress and the administration over appropriations.
*We would like to thank Lisa M. Campbell, JD (Groom Law Group, Washington, DC) and Tamara S. Killion, JD (Groom Law Group, Washington, DC) for authoring this email alert. We also would like to thank Nazanin Tondravi, JD, MPH, LHRM (University of Miami Health System, Miami, FL) for reviewing this email alert.
1 185 F. Supp.3d 165 (D.C. Cir. 2016).
2 Id. at 168.
3 Id. at 175-179.