dollar bill_000058043358_Large“A most curious and convoluted argument whose mother was undoubtedly necessity,” wrote Judge Rosemary M. Collyer in describing the argument made by the U.S. Department of Health and Human Services (HHS) to uphold the constitutionality of cost-sharing reduction payments to insurers under Section 1402 of the Affordable Care Act (ACA). On May 12, 2016, the U.S. District Court for the District of Columbia issued summary judgment in favor of Congress in U.S. House of Representatives v. Burwell, finding that Section 1402 payments had been made without an appropriation in violation of the U.S. Constitution. The latest in a series of court decisions involving the ACA, Judge Collyer’s ruling offers an interesting review of constitutional law and budgetary policy.

ACA Section 1402 mandates that insurers offering qualified health plans through the Exchanges reduce cost-sharing obligations, such as deductibles, copayments and other charges, for eligible low-income individuals and families. More than half of all Exchange plan enrollees received cost-sharing reductions in 2015. The question presented to the court was whether Congress made an appropriation for payments to insurers for cost-sharing reductions provided by Section 1402.

The Constitution requires that authorization and appropriation by Congress are nonnegotiable prerequisites to government spending. The parties agreed that Congress had in Internal Revenue Code (IRC) Section 1324 made a permanent appropriation for Section 1401 of the ACA, which added a new section 36B to the IRC for the payment of premium assistance tax credits. HHS argued that ACA Section 1402 was “economically and programmatically integrated” with Section 1401 and therefore could be implemented consistent with the express appropriation for Section 1401 of the ACA. The court disagreed.

The court found that Congress had not made an appropriation for the process of making “periodic and timely payments” for the cost-sharing reductions. Denying the connection to Section 1401 for appropriation purposes, the court held that premium tax credits are payable under IRC Section 36B, while the cost-sharing reductions are payable under ACA Section 1402. The court’s opinion is an interesting review of the balance of power set forth in the Constitution and the dangers of the legislative drafting process, especially the manner in which each provision involved Congressional Budget Office (CBO) cost estimate scoring. The court’s finding cites to CBO and Office of Management and Budget (OMB) documents that appear to conflict with HHS’s current argument, acknowledging “that no permanent appropriation was available for Section 1402 reimbursements.”

The judge was unpersuaded by HHS’s arguments attempting, as it did in King v. Burwell, to show the intertwined nature of ACA provisions, in this case the cost-sharing and tax credit provisions. The decision distinguishes the dispute from King, where the U.S. Supreme Court addressed whether the ACA’s tax credits are available to individuals who purchase coverage in states with a federal Exchange. While the controversy in King, dealt with arguments over text and drafting, the dispute in House involves whether payments made under ACA Section 1402 had been effectively authorized by Congress. As the Judge plainly explains “There is nothing in the ACA that prevents compliance. The funds simply must be appropriated.”

The court enjoined any further reimbursements to insurers under Section 1402 until a valid appropriation is in place and it is doubtful a move to pass an “emergency” appropriation will be made during the remainder of the year, given the politics surrounding the lawsuit, the budget and any ACA “fix.” The court did stay its injunction pending any appeal, so we will have to watch for the next chapter in this ACA courtroom drama.