Court Rules in Favor of House Republicans in ACA Subsidies Suit

Yesterday, in U.S. House of Representatives v. Burwell, No. 14-1967 (RMC), D. D.C., May 12, 2016, the U.S. District Court for the District of Columbia held that the Affordable Care Act (ACA) does not authorize the administration to reimburse health plans operating on the ACA’s exchanges for cost-sharing reductions given to consumers as required by ACA Section 1402. As enacted, Section 1402 requires health plans on the ACA exchanges (so-called “Qualified Health Plans” or QHPs) to reduce the copayments and deductibles charged to consumers under certain income levels. The federal government, in turn, is required to reimburse QHPs for the amount of the reduction. Now, however, the district court has ruled that Section 1402 requires an annual appropriation to fund payments to health plans but Congress has never appropriated such funds, placing billions of dollars in government payments to health plans in jeopardy.

The ACA includes two main types of subsidies for low-income consumers purchasing coverage on an exchange: (1) premium reduction tax credits, which are addressed in ACA Section 1401, and (2) cost-sharing reductions (CSRs), in ACA Section 1402, which reduce a member’s payments for deductibles, copays, and other cost-sharing. The ACA specifically added Section 1401 to a statutory list of permanently-appropriated tax credits and refunds, but did not include Section 1402 in that list. HHS funded Section 1402 using permanent appropriations, and Republican members of the U.S. House of Representatives brought suit against the Secretaries of the Department of Health & Human Services and the Department of the Treasury, arguing that the Section 1402 funding without appropriation violated the Constitution’s Appropriations Clause.

The district court explained that appropriations for government programs must be expressly stated, and that a direction to pay without a designation of the source of such funds (as in Section 1402) is not an appropriation. Here, Section 1401 (establishing premium tax credits) included a specific amendment to Title 31 of the U.S. Code linking the premium tax credits to an appropriation of funds in the form of tax refunds. This constituted a permanent appropriation for Section 1401. Section 1402 (providing CSRs), however, contained no such amendment.

The court concluded that Section 1402 reimbursements must be funded annually, and that HHS’s reimbursement of QHPs for providing the statutorily required CSRs without a valid appropriation violates the Constitution. Permanently authorized programs dependent on non-permanent appropriations, the court explained, are standard among federal agencies. The court also rejected the administration’s argument that Sections 1401 and 1402 were so interrelated and unified that the permanent appropriation must apply to both provisions. The court also considered but ultimately discarded the arguments that not granting the CSRs a permanent appropriation would have absurd results, such as drastically higher premiums and greater government spending overall, because the only relevant question, in the court’s opinion, was whether it was absurd for Congress to permanently authorize a program in 2010 but not permanently appropriate for it at the same time.

The administration also argued that failure to appropriate funds for Section 1402 would burden the Treasury with litigation by unreimbursed health plans seeking recovery under the Tucker Act, 28 U.S.C. § 1491(a)(1), to receive the money owed to them under Section 1402. To state a cause of action under the Tucker Act, a plaintiff must identify a substantive right to money damages against the United States,¹ asserting a right “to presently due money.”² The House contested whether Section 1402 is a money-mandating statute that conferred an actionable right under the Tucker Act. The court did not address whether health plans could sue under the Tucker Act, explaining that this argument was not ultimately dispositive of the case.

The ruling will almost certainly be appealed to the D.C. Circuit, and the court stayed its ruling pending any appeal. The appeal likely will focus first on whether the House of Representatives had standing to sue the administration, as the district court held in September 2015. That issue, by itself, likely will be dispositive of the case.

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¹ Todd v. United States, 386 F.3d 1091. 1094 (Fed. Cir. 2004).

² See Overall Roofing and Construction, Inc. v. United States, 929 F.2d 687, 689 (Fed. Cir. 1991).

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