California v. Trump

267 F. Supp. 3d 1119
CourtDistrict Court, N.D. California
DecidedOctober 25, 2017
DocketCase No. 17-cv-05895-VC
StatusPublished
Cited by12 cases

This text of 267 F. Supp. 3d 1119 (California v. Trump) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
California v. Trump, 267 F. Supp. 3d 1119 (N.D. Cal. 2017).

Opinion

ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION

VINCE CHHABRIA, United States District Judge

The Affordable Care Act requires health insurance companies to subsidize the cost of co-payments and deductibles for lower-income people. In turn, the Act requires the federal government to make advance payments to the companies to cover the cost of this subsidy. The legab problem in this case is that while the Act requires the insurance companies to be paid, it’s unclear whether the Act actually appropriated money for these payments. If Congress doesn’t appropriate money for a program, the Constitution prohibits the executive branch from spending money on that program — even if Congress previously enacted a statute requiring the expenditure.

The Obama Administration took the position that the Affordable Care Act indeed appropriated money for the payments, so it drew funds from the U.S. Treasury every month to make them. The Trump Administration initially continued this practice, but has now concluded that the Act did not actually make the necessary appropriation. So the Trump Administration has terminated the payments, at least until Congress decides to appropriate the money.

In response, the State of California, along with 17 other states and the District of Columbia, filed this lawsuit, contending the Obama Administration was right. They seek an emergency ruling requiring the Trump Administration to continue making the payments while the lawsuit is pending. This request is denied. First, although the case is at an early stage, and although it’s a close question, it appears initially that the Trump Administration has the stronger legal argument. Second, and more importantly, the emergency relief sought by the states would be counterproductive. State regulators .have, been .working for months to prepare for the termination of these payments. And although you wouldn’t know it from reading the states’ papers in this lawsuit, the truth is that most state • regulators have devised responses that give millions of lower-income people better health coverage options than they would otherwise have, had. This is true in almost all the states joining this lawsuit. Including California, whose regulators issued-a press release .just days before the suit explaining how so, many lower-income people will benefit.'

I.

The central purpose of the Affordable Care Act is to provide health coverage for the millions of people who don’t get it through them jobs. Six years after its enactment in 2010, the Act is well on its way to achieving .that purpose: almost half of the previously uninsured people in the United States now have coverage.1 Some people have coverage because the Act expanded Medicaid eligibility;2 Many others have purchased insurance, usually on new insurance “exchanges” where people can shop for coverage. Three key policies aching in concert have enabled the Act’s success: (1) the Act bars insurance companies from denying coverage to people or charging them more based on their health status; (2) the Act requires people to buy insurance; and (3) the Act provides significant subsidies to help lower-income people buy insurance on the exchanges. It cannot reasonably be disputed that, for the Affordable Care Act to achieve its goals, all three of these pillars must remain standing. See King v. Burwell, — U.S. -, 135 S.Ct. 2480, 2485, 2487, 192 L.Ed.2d 483 (2015).

Lower-income people have access to two forms of subsidies to help them afford insurance sold on the exchanges. The most significant subsidy is a tax credit to help offset the cost of monthly insurance premiums: people whose income puts them between 100% and 400% of the federal poverty level receive significant tax credits to alleviate the cost of buying insurance. (The federal poverty level for a single person is a mere $12,060 per year.)3 To use an example of how the tax credit works oil the exchanges, in San Francisco, a 60-year-old making around $45,000 in 2017 could purchase á fairly typical plan for around $360 per month — even though the actual premiums would be $940 per month absent the tax credits.4 A large majority o'f people who purchase health care on the exchanges rely on these tax credits.5

The premium tax credit is structured so you get it in advance, when you are .actually paying your insurance premiums. Although normally with tax.credits you have to wait, for the benefits until your tax returns are filed the following year, the Affordable Care Act established a system through which your tax credit is estimated and paid in advance to the insurance companies, so they can reduce your premiums by a corresponding amount. If, after the year is over, there is a discrepancy between the discount you received and the amount of your premium tax credit, it is reconciled through your tax returns. 26 U.S.C. § 36B(f). In fact, when you’re shopping ' for insurance on the exchange — at least in California — you are not even told the amount of monthly premium before the tax credit. You’re simply told the amount you’re required to pay.6 ,

The other subsidy — the one that’s the subject of this dispute — reduces the amount that lower-income people have to pay out-of-pocket when they use their insurance to get care. When you have insurance, you typically make “co-payments” when you visit the doctor or pick up medications from the pharmacy. Sometimes you also have a “deductible,” which means that you must pay the full cost of your healthcare expenses until you reach the deductible amount, at which point your insurance kicks in and covers the rest. You also might be required to pay ‘‘co-insurance.” Co-insurance is triggered after you’ve reached' your. annual deductible and requires you to pay a percentage, say 20%, of your doctor’s bill or the price of your medications; the insurance company pays the remaining share. '

The Affordable Care Act refers to these payments as “cost-sharing” payments, because you are sharing the cost of your treatment with your insurance company. The subsidy provided by the Act is called a “cost-sharing reduction,” because the insurance companies are forced to reduce your cost-sharing payments. Specifically, the Act requires insurance companies to offer -plans to lower-income people, with reduced cost-sharing payments. People whose income-puts them between 100% and 250% of the federal poverty level can buy plans of this type.,

In turn, the Act requires the federal government to compensate the insurance companies for those1 reductions. Typically, people refer to the payments by the federal government to the insurance companies as “cost-sharing reduction payments,” or “CSR' payments.” Throughout this opinion, the phrase “CSR payments”' references these payments that the federal government is required to make to the insurance companies. ' :

' As-with the tax credits, the Act provides that the- federal government will pay for these subsidies in advance. Specifically, the federal government estimates in advance the amount of subsidy to which you are entitled and makes a CSR payment in that amount to yóur insurance company. As a result, the insurer can reduce your cost sharing -by a • corresponding amount throughout the year on-the federal government’s dime.

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Cite This Page — Counsel Stack

Bluebook (online)
267 F. Supp. 3d 1119, Counsel Stack Legal Research, https://law.counselstack.com/opinion/california-v-trump-cand-2017.