The Senate is expected to hold a key procedural vote Tuesday on some version of the Trumpcare legislation, even though no one appears to know what is in the bill, or even if major provisions of the bill will have to be struck because they violate the Senate rules.
It’s unclear whether Senate Majority Leader Mitch McConnell (R-KY) will have the votes to move forward with whatever mystery plan the Senate takes up tomorrow. Should the bill fail, however, the law’s opponents do have a backup plan that could potentially cancel millions of people’s health plans.
Though this backup plan would not be nearly as harsh as the Trumpcare legislation — which has been projected to strip health coverage from an estimated 22 million people by 2026, and could therefore kill tens of thousand of Americans every year that it is in effect — the anti-Obamacare plan B could still visit havoc upon many health insurance markets.
The plan B, which Trump has, at times, appeared supportive of, involves an obscure provision of the Affordable Care Act, a lawsuit brought in federal court, future suits that would arise in a completely different court, and the nuances of federal appropriations policy. In other words, things are about to get wonky.
A politically motivated lawsuit against Obamacare
More than a year ago, a Republican federal judge in Washington, D.C. held that certain federal payments intended to make health care more affordable must cease. She did so at the urging of the GOP-controlled House of Representatives, which took the unusual step of suing the Obama administration.
Obamacare requires insurers to “reduce cost-sharing,” that is, they must take certain steps to lower deductibles, co-pays, and similar expenses paid by consumers. The federal government then must “make periodic and timely payments to the issuer equal to the value of the reductions.”
In mid-2016, however, Judge Rosemary Collyer, a George W. Bush appointee, called for these payments to be halted. Writing in United States House of Representatives v. Burwell, Collyer concluded that, although the payments were “authorized” by the Affordable Care Act, they must cease because Congress did not “appropriate” money to cover them.
Collyer stayed her decision pending review by higher courts. She also relied on a fairly dubious interpretation of her own jurisdiction — it is far from clear that the House of Representatives was allowed to bring this suit in the first place — and the left-leaning United States Court of Appeals for the District of Columbia Circuit was expected to reverse Collyer.
But then Donald Trump won a stunning second-place victory over Democratic presidential candidate Hillary Clinton. Since then, the House litigation has been in limbo, as the Trump administration ponders whether to drop the appeal and accept Collyer’s ruling as binding.
Sabotaging health care reform
If the Trump administration does ultimately drop this appeal — and Trump himself has hinted that he will, with his repeated threats to “let Obamacare fail” — that would set off an uncertain chain of events that could endanger many people currently covered through the Obamacare exchanges.
A contract that insurers in these exchanges entered into with the government contains a potentially very significant provision. In it, the Obama administration acknowledged that insurers entered into the marketplace on the assumption that cost sharing reduction payments — the payments cut off by Collyer’s decision — would continue to be made.
“In the event that this assumption ceases to be valid during the term of this Agreement,” the contract provides that the federal government “acknowledges that the issuer could have cause to terminate this agreement subject to applicable state and federal law.” Insurers, in other words, might pull out of the Obamacare exchanges if Collyer’s decision is allowed to stand, leaving many individuals who depend on those health plans high and dry.
Even if insurers don’t invoke this rather drastic solution, they still are likely to jack up premiums to cover the lost cost payments. Exchange customers who qualify for subsidized premium payments would not feel these higher premiums, because the premiums would be absorbed by their federal subsidy, but the government sure would. An Urban Institute brief claims that Collyer’s ruling could cost the federal government an additional $47 billion over ten years.
Meanwhile, exchange consumers who do not qualify for a subsidy would need to eat the full cost of the higher premiums or risk going without care.
There is, however, another safety value for the insurance companies — provided that Trump doesn’t shut down this valve through strategic appointments.
Enter the Court of Federal Claims
The Court of Federal Claims primarily hears suits by litigants claiming they are owed money by the federal government. Even if Collyer’s views ultimately prevail, there is a very strong argument that insurers could bring suit in this court to recover the cost sharing reduction payments Collyer cut off.
As Nicholas Bagley, a law professor and health policy expert, explains, “even without an appropriation, health plans still have a statutory entitlement to cost-sharing payments.” The Congress has “promised to pay them money,” and insurers should be able to rely on that promise even if Congress never got around to making a specific appropriation. If the government won’t pay, insurers can demand payment in the Court of Federal Claims.
It’s an unwieldy, foolish way to distribute payments authorized by law. As Bagley writes, insurers would “have to file thousands upon thousands of duplicative lawsuits to get the money.” But it could end with everyone being made whole in the end.
Well, except for one small problem. Suits in the Court of Federal Claims, like any lawsuit, require good judges who won’t bring an ideological agenda to their courtroom.
Although the Court of Federal Claims has sixteen active judgeships, only ten of those seats are currently filled. Trump’s nominees for two of those seats, moreover, are a lawyer at a right-wing litigation shop and another attorney whose career highlights include defending voter suppression and arguing on behalf of anti-trans discrimination.
Should a Court of Federal Claims judge rule against an insurer, that order could be appealed to a higher court. But that would require more time, more effort, and more attorneys fees to be paid by the insurer. At some point, some insurers could decide that the game isn’t worth the candle and withdraw from the exchanges. And even if they don’t, the costs of litigation will eventually be absorbed by consumers and the nation’s taxpayers.
So, while Trump won’t be able to, at least on his own, produce the level of misery that would result if Trumpcare becomes law, he could generate a great deal of chaos in the Obamacare exchanges.
And just how much chaos is likely to be determined by an obscure court that Trump is likely to have a great deal of influence over, as well as by insurers who, ultimately, are just in this game to make money.