President Trump faces a new legal snag when it comes to ending Obamacare's insurer payments, but he can still cut off the billions of dollars in funding and trigger more instability in the exchanges.
A ruling by the D.C. Circuit Court of Appeals on Tuesday no longer gives Trump the option to drop an appeal on the disputed funds called cost-sharing reduction subsidies, but allows more than a dozen state attorneys general to defend the payments and argue why they would be harmed without them.
The future of the payments is in limbo because of a lawsuit begun under the Obama administration, when House Republicans argued in 2014 that the administration had illegally allocated the subsidies because they needed an appropriation from Congress. A U.S. district judge sided with the House, and the payments were continued as the Obama administration filed an appeal.
The latest ruling by the three-judge panel, all of whom were appointed by former President Barack Obama, allows the case to continue even if the funds are cut off.
"It complicates the public signaling that the Trump administration might give," said Nicholas Bagley, a health law expert at the University of Michigan Law School. "It would have been convenient to say that the Trump administration was only doing what the court told it to do."
The appeal fell to Trump when he became president, and the administration has made the payments to insurers each month as Trump waited on congressional Republicans to finalize a healthcare bill that would have repealed and replaced portions of Obamacare. After they failed to come to an agreement, Trump threatened on Twitter to withhold the funds, which are expected to reach $7 billion this year.
The federal payments go directly to insurers and help them reduce out-of-pocket medical costs for roughly 6 million low-income people who have coverage through Obamacare's exchanges. Insurers are required to offer lower prices for those expenses under the law, so if the subsidies are cut off, they would look to exit the exchanges as soon as they are able or raise their premium rates by about 20 percent for next year to make up for their losses.
Millions of people could be uninsured for months or longer, and even more counties could be facing the possibility of having no insurer to buy coverage from. Across the country, 19 such counties, covering 12,076 people, already are facing this possibility as insurers say that there is too much uncertainty ahead and as some lament that the exchanges have caused them to lose too much money.
Projecting some of those outcomes, the appeals court order concluded that states would be affected by ending the appeal, saying it would "lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the states will have to provide healthcare."
Insurers were largely silent during much of the healthcare debate but have publicly released letters to the administration saying that the payments must be guaranteed so that there wouldn't be sudden disruption. The Trump administration hasn't announced how it will handle the payments, as insurers are planning what they will charge on the exchanges for next year.
In California, for instance, health officials announced Tuesday that if the funds were not allocated, rate increases for 2018 would nearly double from a planned 12.5 percent to 24.9 percent. Insurers in other states have filed separate rates that reflect the inclusion and absence of the funds, and a decision to cut off funding would result in higher federal spending because subsidies to help people pay for premiums would rise to counter the increase in premiums.
Eric Schneiderman, attorney general of New York, one of the states involved in the cases, said the appeals court's decision was "good news for hundreds of thousands of New York families that rely on these subsidies for their healthcare.
"It's disturbingly clear that President Trump and his administration are willing to treat them as political pawns; but this coalition of attorneys general stands ready to defend these vital subsidies and the quality, affordable healthcare they ensure for millions of families across the country," he said.
Trump is expected to deliver a decision this week on whether he will continue to make Obamacare's insurer payments. In the past he has said that he believes the public would blame him for the fallout.
"It's possible the administration will still, not withstanding, seek to cut off funding, but that's a decision that will rest squarely on the people in charge, not the courts," said Justin Giovannelli, project director at the Center on Health Insurance Reforms at Georgetown University's Health Policy Institute. "It removes any political cover from a decision that is ultimately theirs; they are responsible for the markets and consumers that rely on them."
In response, members of Congress have said they would be willing to appropriate the funds. If they do not, however, and the administration cuts them off, insurers are likely to sue the administration for them.
Even with bipartisan agreement to allocate funding, arriving at a deal is showing signs of political obstacles. Sen. Lamar Alexander, chairman of the Senate Health, Education, Labor and Pensions Committee, has said he believes the subsidies should be allocated by Congress for the short term, through 2018. Democrats, however, have asked for a longer timeline.
Without a longer timeline, the funds may become central to budget debates in years ahead if Obamacare is to remain in place.
"Ideally you would have long-term or mandatory appropriation so it does not become a constant battle and threat of disruption of the markets on a yearly basis," Giovannelli said.
Bipartisan hearings on the issue are expected in September, during which other proposals will be made to stabilize the Obamacare exchanges.
"The politics of this are hard," Bagley said. "The Democratic negotiation position is, 'We get cost-sharing and you get nothing,' but Republicans will say, 'We'll give it to you but we want something in return.' I don't know if there's room for a deal. I think it's possible negotiations will break down over what Republicans can get and what Democrats are willing to give up."