Court Denies Preliminary Injunction in Insurance-Subsidy, Obamacare Case

Steven D. Schwinn, John Marshall Law School

Judge Vince Chhabria (N.D. Cal.) today denied the states' motion for a preliminary injunction in the their case against the Trump administration for halting cost-sharing reduction ("CSR") payments to insurance companies on the Obamacare exchanges. We posted on the complaint here.

Judge Chhabria ruled that the plaintiff-states did not demonstrate a likelihood of success on the merits, because Congress didn't appropriate funds for the CSRs, even though the ACA requires that the government pay them:

In sum, the [ACA] requires the federal government to pay insurance companies to cover the cost-sharing reductions. The federal government is failing to meet that obligation. If there was no permanent appropriation in the Act, Congress is to blame for the failure, because it has not been making annual appropriations for CSR payments. The Administration cannot fix Congress's error, because the Constitution prevents the Administration from making payments on its own. In contrast, if the Act created a permanent appropriation, the Administration is legally at fault for the federal government's failure to meet its obligation under the Act to make CSR payments. On the merits, it's a close and complicated question, even if the Administration may seem to have the better argument at this stage.

As to the other preliminary injunction factors, Judge Chhabria noted that most of the states in the lawsuit have taken measures with the insurance companies to offset the impact of the administration's decision not to pay CSRs to the consumers. States did this by encouraging insurance companies to increase premiums in certain plans so that consumers would qualify for higher premium tax credits (which, unlike the CSRs, have a permanent appropriation under the ACA). For most consumers, the court said, the higher premium tax credits would well offset any harm based on the administration's decision not to pay CSRs.

The ruling means that the court won't require the administration to make CSR payments, at least for now.