EBIA Weekly Newsletter

Court Rules Congress Has Not Appropriated Funds to Reimburse Exchange Insurers for Cost-Sharing Reductions

   May 19, 2016

U.S. House of Representatives v. Burwell, 2016 WL 2750934 (D.D.C. 2016)

Available at https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2014cv1967-73

In a lawsuit brought by members of the U.S. House of Representatives, a trial court has ruled that federal agencies violated the Constitution by reimbursing insurers for cost-sharing reductions required under health care reform because Congress has not appropriated federal funds for this purpose. As background, low-income individuals who enroll in health coverage through an Exchange may be eligible for premium tax credits and some may also qualify for reductions in cost-sharing features such as deductibles and copayments. Insurers are required to provide cost-sharing reductions to eligible insured individuals and are entitled to be reimbursed with federal funds. However, in a lengthy ruling covering federal appropriations law, statutory construction, and health care reform’s legislative history, the court agreed with the House that Congress has not appropriated money to fund the required reimbursements, and enjoined federal agencies from using further funds for this purpose.

The court explained that federal funds may only be spent when Congress has both authorized a program and appropriated the necessary funds—authorization alone does not permit expenditures. Permanent appropriations make funds available indefinitely, while current appropriations make funds available for a limited time, requiring periodic reappropriation (typically annually). It was undisputed that funds for health care reform’s premium tax credits are permanently appropriated. The agencies argued that cost-sharing reductions should be treated the same as premium tax credits because the provisions are economically and “programmatically” integrated. But the court pointed out that the provisions are set forth in separate sections of the statute, and the permanent appropriation refers only to the section on premium tax credits. Because appropriations cannot be inferred, the court concluded that funding for cost-sharing reimbursements is subject to annual appropriation—which Congress has never approved. It distinguished this case from an earlier challenge to payment of premium tax credits for coverage purchased on the federal Exchange, in which the Supreme Court held that a broad reading of the statue was proper (see our Checkpoint article), explaining that this case involves a failure to appropriate, not a drafting failure. Although the court prohibited further reimbursements to insurers, it stayed its injunction pending any appeal.

EBIA Comment: Employer plans are not directly affected by this ruling because it involves individual Exchange coverage. But the decision creates further economic uncertainty for insurers offering coverage through the Exchanges—they apparently are required to provide cost-sharing reductions to eligible insured individuals even without federal reimbursement, perhaps creating more incentive for insurers to abandon the Exchanges and endangering a key component of health care reform. Insurers continuing to offer Exchange coverage undoubtedly will seek to recoup the expense of cost-sharing reductions in other ways, such as premium increases, potentially increasing government spending for premium tax credits. An appeal seems very likely, so this issue is far from resolved. For more information, see EBIA’s Health Care Reform manual at Sections XXI.B.4 (“Individual Eligibility Determinations”) and XXIX.F (“Premium Tax Credits for Lower-Income Individuals”).

Contributing Editors: EBIA Staff.