Robert Donachie, DCNF

U.S. District Judge Vince Chhabria of California preliminary rejected a lawsuit Wednesday from states challenging the Trump administration’s decision to stop paying out Obamacare subsidies.

“Although the case is at an early stage, and although it’s a close question, it appears initially that the Trump Administration has a stronger legal argument. Second, and more importantly, the emergency relief sought by the states would be counterproductive,” Chhabria wrote in the decision.

Some 18 states and the District of Columbia asked for the federal court in California to order the administration to fund Obamacare subsidies, also known as cost-sharing reductions (CSRs).

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

“If the states are so concerned that people will be scared away from the exchanges by the thought of higher premiums, perhaps they should stop yelling about higher premiums,” the judge wrote. “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.”

The Trump administration announced in early October that it will no longer fund Obamacare subsidies. The federal government was slated to pay out around $7 billion in CSRs in 2017.

The administration is following the Republican line of thinking that these subsides are a “bailout” for insurance companies.

“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system,” the White House said in a statement. “Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.”

The states’ lawsuit makes an argument against a 2014 GOP lawsuit that claims Obamacare subsidies are “unconstitutional.”

Under the leadership of former House Speaker John Boehner, the House filed suit against the Obama administration in 2014, claiming it was illegally reimbursing marketplace insurers for CSRs.

Boehner, along with House leadership, felt that CSRs required an annual appropriation approved by Congress. The House argued that because Congress had never explicitly appropriated the funds for those payments, the administration’s actions were unconstitutional. After nearly two years of deliberation, Senior Judge of the U.S. District Court for the District of Columbia Rosemary M. Collyer concluded the House’s claim had legal standing and allowed the case to move forward May 12, 2016.

One of the problems critics point out with abruptly stopping CSR payments is that it will likely lead to skyrocketing premiums for Obamacare enrollees. Roughly half of the consumers who purchase health insurance through Obamacare qualify for cost-sharing reductions. Obamacare consumers saw their out-of-pocket costs lower by over $1,000 through these subsidies.

Providers acknowledged the possibility that Trump would stop these payments in their 2018 offerings, but the uncertainty is still very real for 2019.

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