Judge Sides With Trump Administration, Denies Request to Force Obamacare Subsidy Payments

When President Trump yanked federal funding for Affordable Care Act subsidies two weeks ago, a coterie of states swiftly filed a lawsuit against the administration to continue the payments. On Wednesday, a federal judge rejected their request to halt the White House’s decision.

Their lawsuit, filed by 18 states and DC, contended that suspending cost-sharing reduction payments would cause immediate harm to residents who receive the subsides. But Judge Vince Chhabria, a U.S. District Judge for the Northern District of California appointed by President Obama, rejected their claim.

Chhabria’s reasoning for denying their temporary restraining order request, though, belied the idea that ending cost-sharing subsides would destabilize the insurance market. Insurer in many states have anticipated Trump’s decision, Chhabria said, and have restructured 2018 rates to offset the absence of subsidies.

“State regulators have been working for months to prepare for the termination of these payments,” Chhabria said in a 29-page decision. “And although you wouldn’t know it from reading the states’ papers in this lawsuit, the truth is that most state regulators have devised responses that give millions of lower-income people better health coverage options than they would otherwise have had.”

California’s state-run exchange, for example, restructured its payments before Trump announced his decision so that both insurers and people receiving the subsidies would be protected. Starting in 2018, silver-level policies will increase by 12.4% to cover the deficit — a cost-sharing reduction surcharge. States suing for an injunction, Chhabria ruled, failed to acknowledge these adjustments in their arguments:

But as already discussed, they are only able to make that argument sound compelling by omitting the fact that the premium increases in almost every state will cause tax credits to increase in a corresponding amount, leaving so many people (especially lower-income people) better off or unharmed. To be sure, in the few states that have not responded as most states have, the harm may be greater. But it may not be too late for those states to change course; for example, just two days ago, Maryland apparently finalized its decision to take the California approach.

Chhabria’s particularly salty opinion also criticized states for wasting resources on suing the federal government when they should be alerting residents of open enrollment, which starts at the beginning of November.

“With open enrollment just days away, perhaps the states should focus instead on communicating the message that they have devised a response to the CSR payment termination that will prevent harm to the large majority of people while in fact allowing millions of lower-income people to get a better deal on health insurance in 2018,” Chhabria said.