(Bloomberg) - President Barack Obama’s signature healthcare law was dealt another blow as a federal judge ruled a key program intended to reduce consumers’ out-of-pocket medical bills is unconstitutional because it relies on money that hasn’t been appropriated by Congress.
The ruling on Thursday was a victory for the Republican-led House of Representatives, which challenged the provision in 2014 and defeated an Obama administration bid to dismiss the lawsuit last year.
U.S. District Judge Rosemary Collyer put her decision on hold pending an appeal after issuing it in Washington. If her ruling stands, low-income ACA customers could see higher co-payments, deductibles and other costs at doctors’ offices and hospitals.
The legislators previously said subsidies to reduce out-of-pocket charges will total $175 billion over a decade and weren’t approved by Congress. A related program that provides tax credits to reduce insurance premiums in the ACA has permanent funding, under the law, and isn’t affected by the ruling.
The cost-sharing subsidies don’t, and “such an appropriation cannot be inferred,” said Collyer, who was appointed by President George W. Bush.
Signed into law in March 2010, the Patient Protection and Affordable Care Act, has been under near-constant legal assault. House Republicans have tried more than 50 times via legislation to repeal all or part of the law.
The U.S. Supreme Court upheld the law’s requirement that all Americans obtain health insurance in June 2012. Last year, the high court rejected a lawsuit by Virginia residents challenging the availability of subsidies to reduce insurance premiums in online marketplaces, called exchanges, established by the federal government.
White House Press Secretary Josh Earnest told reporters on Thursday that the administration is “confident” in its legal arguments, and blamed Republicans for using the court system to resolve political disputes.
The Justice Department is reviewing the ruling and will determine whether to appeal, he said.
“This is not the first time that we’ve seen opponents of the Affordable Care Act go through the motions to try to win this political fight in the court system,” he said. “I have not heard at this point any sort of analysis of potential impact of a legal outcome consistent with this decision.”
Hospital stocks dropped after the ruling, on concerns it may jeopardize a source of revenue for chains like Tenet Healthcare Corp. and Community Health Systems Inc. Insurers, including Anthem Inc. and Aetna Inc., also declined.
"A loss of cost-sharing subsidies would have a detrimental impact on industry earnings given that high-deductible health plans (Silver plans) currently represent a majority of those covered under the ACA,” Chris Rigg, an analyst at Susquehanna Financial Group, wrote in a note Thursday.
The cost-sharing subsidies are only available to consumers who purchase silver-level coverage under Obamacare, plans which generally carry the second-cheapest monthly premiums. About 71 percent of plans selected in exchanges run by the federal government as of Feb. 2016 were silver plans, Rigg said.
The White House’s Office of Management and Budget and Department of Health and Human Services Secretary Sylvia Mathews Burwell were wrongfully spending money for the cost-sharing subsidies before Congress had approved it, the judge said. She called their defense "unpersuasive."
"The secretaries ignore their own actions and focus instead on congressional inaction," Collyer said. "It strains credulity to suggest that OMB or HHS submitted a multibillion-dollar budget request without analyzing the relevant statutes."
Louisiana Representative Steve Scalise, the third-ranking member of the House Republican leadership, praised the court’s decision.
“Today’s ruling is an important victory for the rule of law and the separation of powers so critical to America’s representative democracy,” Scalise says.
The case is U.S. House of Representatives v. Burwell, 14-cv-1967, U.S. District Court, District of Columbia (Washington).
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