A federal judge on Thursday ruled the Obama administration has been improperly funding an Obamacare subsidy program, a huge win for the House of Representatives.
"Congress is the only source for such an appropriation, and no public money can be spent without one,” wrote Collyer, a George W. Bush appointee.
The ruling, if it stands, could be a significant financial setback for the millions of low-income Americans who benefit from the cost-sharing subsidies, which help people pay for out-of-pocket costs like co-pays at a doctor’s office. It would not be a fatal blow to the future of the president’s signature domestic policy achievement, but it could push insurance costs higher.
Republicans have praised the challenge as a needed check on the White House's authority.
"This decision is a critical step in protecting Congress' power of the purse from an administration that has repeatedly ignored a fundamental principle of our Republic: the separation of powers," said House Ways and Means Committee Chairman Kevin Brady.
The Obama administration is expected to immediately appeal the decision to the D.C. Circuit Court of Appeals.
"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," said White House press secretary Josh Earnest.
The health care law was designed to reimburse insurers for providing the cost-sharing subsidies to low-income customers who purchased exchange coverage. A second Obamacare subsidy program helping customers pay monthly premiums wasn't a target in the House lawsuit.
The House argues that the cost-sharing program was authorized but never appropriated. The House says that there is proof that the White House knew the cost-sharing subsidies weren’t funded and worked around the legislation to implement them.
The White House asked Congress to fund the program in its fiscal 2014 budget request, which was denied. It then unilaterally funded the program through the refundable tax credit account anyway, the House lawyers argued in court.
When he filed the House v. Burwell lawsuit two years ago, former House Speaker John Boehner framed it as a check on the executive branch’s ability to change legislation once it was approved by Congress.
But the Justice Department says the subsidies were funded appropriately. Its lawyers told the court that the program was funded in the same pot of money as the law’s refundable tax credits to help people pay for premiums.
Part of the Obama administration’s defense is that the health law was not written well — an argument it also made during prior Obamacare legal battles.
The Obama administration argued that the budget request cited by the House isn’t proof of malfeasance. Justice Department lawyers said the request did not fully account for “text, structure, design and history of the ACA — a complex statute that the Supreme Court recently described as containing ‘more than a few examples of inartful drafting.'”
The Obama administration also heavily relied on last year's Supreme Court decision in King v. Burwell — which was centered on the health law’s premium subsidies — to stress that a court must look at an entire law, not specific provisions. It says that the two subsidy programs were designed to work together as one.
The cost-sharing subsidies are available to people with incomes between the federal poverty level and 250 percent FPL — or between $24,300 and $60,750 for a family of four — to help pay for health care services.
Several million Obamacare customers receive cost-sharing subsidies, but the exact figure is unknown. As of the middle of the last Obamacare enrollment period, 57 percent of people who signed up for coverage through the federal exchange on HealthCare.gov receive them.
If the cost-sharing subsidies are eliminated, government actuaries estimate that insurers would increase premiums — up to 20 percent to 30 percent for silver-tiered plans — to make up for the loss. As a result, the premium tax credits would increase, at a higher cost to the federal government, according to the Department of Health and Human Services.
Insurers downplayed the ruling Thursday. "There is a long judicial process ahead before a final decision is made," said Marilyn Tavenner, CEO of America's Health Insurance Plans, the industry's main lobbying group. "Our members' focus is and will remain on serving consumers — to ensure their coverage is protected and their health care choices are maintained."
If the subsidies are ultimately struck, it would reinforce claims from opponents of the health law that the Obamacare insurance plans are not actually affordable.
The House originally wanted to challenge both the cost-sharing subsidies and the executive branch’s changes to Obamacare’s employer mandate. But the mandate challenges were tossed in an earlier court ruling.
The administration had tried to get the case thrown out on procedural grounds, contending that the House can’t bring litigation against the executive branch. But in September, Collyer allowed the suit to proceed.
At the time, the White House and legal allies slammed the decision as unprecedented, arguing that this was a political battle, not a legal one.
The suit is the latest in what has been a persistent series of legal challenges for Obamacare. The Supreme Court has ruled twice in the law’s favor. In 2012, it upheld the individual mandate and, in 2015, it upheld the premium tax credits.
In 2014, the justices said that closely held companies don’t have to provide birth control under the law if they have religious objections. The court is now considering a similar challenge from nonprofit organizations with religious ties.