Epic legal battles shaping up over Trump’s scrapping of Obamacare subsidies – Politico

Eric Schneiderman is pictured. | AP Photo

New York Attorney General Eric Schneiderman immediately indicated Thursday night he intends to use the courts to fight the decision. | Frank Franklin II/AP

President Donald Trump’s move to cut off critical Obamacare subsidies will almost surely be tied up in the courts for years as Democratic-led states seek injunctions, while insurers seek to recover payments they say they’re owed.

Consumers are likely to be caught holding the bag if some Obamacare markets teeter on the verge of collapse, while most will end up paying higher premiums to make up for the shortfall, estimated at $7 billion this year alone.

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“The market can only take so many shocks,” said Ceci Connolly, CEO of the Alliance of Community Health Plans. “We had hoped that a business person would have understood the implications to the market, but that seems not to be the case.”

Obamacare customers are already contending with fragile markets. Nearly half of all counties have just a single insurer selling plans, and premiums are skyrocketing in many states. Trump’s decision to cut off the subsidy payments two weeks before open enrollment begins on Nov. 1 for Obamacare’s fifth enrollment season is sure to lead to further uncertainty.

“There was a lot of anxiety that we sensed from answering members’ phone calls and inquiries about what this means to them,” said Marti Lolli, chief marketing officer for Michigan’s Priority Health. “We’re working very hard right now to calm our customers because we’ve got them covered, literally.”

They’re seeking a judgment that the subsidy payments are lawful — and a broader injunction to keep the subsidies flowing to Obamacare insurers while the lawsuit plays out.

“It’s about doing what’s right by our people,” said Kentucky Attorney General Andy Beshear, a Democrat whose state has a Republican governor opposed to Obamacare.

“That’s certainly my hope at this point,” said Washington Insurance Commissioner Mike Kreidler, a Democrat, of the legal action. “That would be the action we would be anticipating and hoping for.

But Nicholas Bagley, a professor at the University of Michigan Law School who has written extensively about Obamacare legal issues, is skeptical about the success of that effort.

“I don’t know that the argument on the merits has a whole lot of juice,” Bagley said. “Forcing an administration to continue making payments when the president believes there is no appropriation, and when Congress believes there’s no appropriation, would be a pretty extreme move by the court, even if it was a temporary measure.”

States could also bring separate cases in federal court. The attorneys general in New York and California immediately indicated Thursday night they intend to use the courts to fight the decision.

“I will not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost,” New York Attorney General Eric Schneiderman said in a statement.

Insurers are also almost certain to file their own lawsuits. The most likely venue would be the Court of Federal Claims, which is set up to handle cases where litigants believe they’ve been stiffed by the federal government.

There’s already a raft of cases pending over another Obamacare program that was intended to shield insurers from the financial risks of attracting particularly sick, expensive customers since they were no longer allowed to question members about their medical histories. But the program experienced a shortfall of several billion dollars after congressional Republicans required it to be budget-neutral.

Most legal experts believe insures would have a strong case in seeking to recover the cost-sharing subsidy payments through that venue.

“I think insurers, if they sue over the cost-sharing payments, are going to win going home,” Bagley said. “I’ve heard nobody contest that even a little bit.”

Tim Jost, another Obamacare legal expert, is similarly bullish on insurers’ prospects. But that doesn’t mean there wouldn’t be financial pain, particularly for smaller insurers that might struggle to stay afloat.

“It would be a straightforward case,” Jost said. “The problem is that it would take years to wrap up.”

That could lead to financial headaches for insurers in the interim. Community Health Choice, for example, a nonprofit insurer based in Houston, estimates it will lose out on $25 million in funding in the final three months of the year.

“What really needs to happen is that Congress needs to appropriate the funds for 2018 and we need to have an adult conversation about how to move forward,” said Ken Janda, CEO of Community Health Choice. “All of those things are created by the current president and Congress to blow up the Affordable Care Act, and they have not come up with a reasonable replacement.”

Renuka Rayasam contributed to this report.

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