The often-challenged Affordable Care Act suffered a potentially crippling constitutional blow in federal court on Thursday, when a trial judge in Washington, D.C., ruled that the government had wrongly spent billions of dollars in the past two years to reimburse insurance companies for providing health coverage at lower costs to low- and moderate-income consumers.

U.S. District Judge Rosemary M. Collyer, in a thirty-eight-page ruling upholding a constitutional challenge pursued by the U.S. House of Representatives, did not take any immediate action to stop that spending.  Instead, she put her decision on hold to allow it to be challenged in an appeal — either to a federal court of appeals or directly to the Supreme Court.

It seems quite unlikely that the dispute will be finally settled before President Barack Obama’s term ends next January.  The near-term future and ultimate fate of the entire ACA program probably depends upon the outcome of this year’s presidential election, in which it has already been a major issue.

The lawsuit decided Thursday — U.S. House of Representatives v. Burwell — involved only the latest in a string of federal court challenges to Obama’s signature domestic policy initiative.  The administration has won more than it has lost, but is now awaiting the outcome of a major case in the Supreme Court: the fate of the ACA birth-control mandate as it applies to religious charities, hospitals, and colleges.

There is no doubt that the administration will pursue an appeal of Collyer’s new ruling because this particular controversy goes to the heart of whether the private insurance industry will remain willing to provide lower-cost health coverage through the ACA exchanges, or marketplaces, that have now enrolled millions of new consumers.

At issue in the case, as decided on Thursday, was the part of the ACA program that required insurance companies to provide coverage to low- and moderate-income consumers, mainly through policies sold on the exchanges, with the costs to the consumers lowered by reduced co-pays and back-up or co-insurance, along with lower deductibles.  The insurance companies, however, do not have to absorb those costs; the ACA mandated that the government directly reimburse such “cost-sharing” arrangements, with federal funds.

Along with that part of the ACA, the law also provided tax credits to consumers at low or moderate income levels to help them afford the premiums charged for the insurance they obtained on the exchanges.

Together, the two programs were estimated to cost the government about $5 billion a year.  In her new ruling, Collyer decided that the cost-sharing program, as implemented since January 2014, has been spending money that Congress did not approve.  It is unconstitutional, she ruled, because no money can be taken out of the federal treasury if it has not been specifically provided by act of Congress.

“Paying out reimbursement,” she wrote, “without an appropriation [from Congress] violates the Constitution.  Congress authorized reduced cost-sharing but did not appropriate monies for it, in the fiscal year 2014 budget or since.  Congress is the only source for such an appropriation, and no public money can be spent without one.”

The judge estimated that, in the past two years, the government has spent billions of dollars without the authority to do so.  The judge, however, found that Congress had provided authority to cover the spending for the tax credits to consumers who use them to help afford health coverage.  That was funded, she said, through a permanent appropriation measure.

Collyer sharply ridiculed the government’s basic argument that the tax credit and cost-reimbursement parts of the ACA program were interconnected, and thus could both be funded out of that permanent appropriation for tax credits.  (Under ACA, insurance companies can only provide cost-sharing arrangements to consumers who are eligible for the tax-credit subsidies.)

The government’s overall argument about linking the two approaches, the judge commented, is “most curious and convoluted.”  Its “mother was undoubtedly necessity,” she added, with some sarcasm.

Although she ruled that the government had no authority to pay out any money to insurance companies as cost-sharing reimbursements, she did conclude that Congress had in fact authorized that program to be created.  What is lacking, she found, was separate authority to make the payments contemplated by that provision.

If the normal route of appeal is followed, the case would move on next to the U.S. Court of Appeals for the District of Columbia Circuit.  However, the administration also has the option of trying to move the case straight to the Supreme Court by asking the Justices to take it on without waiting for the D.C. Circuit to rule.

At an earlier point in the House of Representatives case against the ACA, the administration had tried to have the case dismissed on the theory that the House had no right to sue on the premise that it would not suffer any injury for how the government made spending decisions under ACA.  Collyer last September upheld the right of the House to sue, although she did narrow significantly the number of specific challenges the House had made.

Because the judge refused to allow the government to appeal her ruling allowing the case to proceed (and, on Thursday, turned down a government request to reconsider that point), that question of the House’s “standing” will remain an issue for the government to contest when it does file an appeal.  It is highly unusual for courts to allow one house of Congress, or individual lawmakers, to sue in federal court, so the “standing” issue could become decisive when an appeal is decided.

Posted in Cases in the Pipeline, Featured, Health Care

Recommended Citation: Lyle Denniston, Judge: Billions spent illegally on ACA benefits, SCOTUSblog (May. 12, 2016, 1:59 PM), http://www.scotusblog.com/2016/05/judge-billions-spent-illegally-on-aca-benefits/