Cost-Sharing Subsidies Ruling Adds More Uncertainty to Affordable Care Act

Holland & Knight issued an alert in May 2016 regarding litigation by the U.S. House of Representatives against the Obama Administration and the decision of the U.S. District Court for the District of Columbia enjoining any further payments to health insurers for the Affordable Care Act's (ACA) cost-sharing reduction program. As predicted in the alert (see "House GOP Wins Challenge Against Affordable Care Act," May 12, 2016), the Obama Administration filed an appeal. Importantly, and unexpectedly, on Dec. 5, 2016, the U.S. Court of Appeals for the District of Columbia Circuit granted a motion by the U.S. House of Representatives to hold the matter in abeyance until after President-Elect Donald Trump takes office.

This is a significant development throwing more uncertainty into the future of the ACA and undoubtedly causing concerns among health insurers. Once President-Elect Trump takes office, he can instruct the U.S. Department of Justice (DOJ) to abandon the appeal. If that happens, the district court's decision would stand and the government arguably would not make further cost-sharing reduction payments to insurers.

Although Trump and some congressional Republicans have called for a transition period to ensure some continuity of coverage for individuals receiving insurance through the Health Insurance Marketplace, the elimination of cost-sharing reductions could have serious implications for the affordability of continued coverage under the ACA even for a transitional period.

Another matter of controversy is the district court's position, even after acknowledging that "no precedent dictates the outcome" that the House can sue the executive branch concerning its implementation of law. On appeal, the DOJ argued that the district court erred. Therefore, with consequences far beyond the ACA, if the appeal is abandoned under the direction of President-Elect Trump, the opportunity to challenge whether such a political dispute can be settled by the judiciary is presumably lost.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.