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D.C. District Court Rules That U.S. House Of Representatives Has Standing To Pursue Claims Regarding Cost-Sharing Reductions
November 25, 2015

On September 9, 2015, the U.S. District Court for the District of Columbia denied much of the Obama Administration's motion to dismiss the House of Representatives' Affordable Care Act (ACA) challenge in U.S. House of Representatives v. Burwell. The case claims that the Secretary of Health and Human Services (HHS) funded cost-sharing reduction (CSR) payments to insurance companies without the constitutionally required Congressional appropriation. The suit also included challenges to the Administration's delayed implementation of the employer mandate, but the court dismissed those claims. The Administration sought dismissal of the case, arguing that the House lacked standing and that the claims were not justiciable. The court has not yet addressed the merits of the House's claims.

The ACA included CSRs to lower deductibles, copayments, coinsurance, and out-of-pocket maximums for lower-income individuals that enroll in silver plans on the Marketplace. By targeting cost sharing, the CSRs are designed to mitigate some of the financial barriers to using health insurance to obtain health care services. Under the ACA, insurance companies are required to provide CSRs on silver plans purchased by Marketplace enrollees with incomes up to 250% of the Federal Poverty Level. The ACA also requires the Secretary of HHS to offset the cost of CSRs by making "periodic and timely payments to the issuer equal to the value of the reductions." ACA § 1402(c)(3). The House contends that the ACA does not include an appropriation permitting HHS to make such payments.

The Administration's motion to dismiss primarily challenged the House's standing to pursue claims regarding the permissibility of HHS payments for CSRs. The court concluded that "the constitutional trespass alleged in this case would inflict a concrete, particular harm upon the House for which it has standing to seek redress in this court." Because Congress is the "only body empowered by the Constitution to adopt laws directing monies to be spent" from the Treasury, the Court found that "if the Executive could circumvent the appropriations process and spend funds however it pleases," the House's role would be usurped.

The Court stressed that the plaintiff in this case is the House of Representatives as a whole, duly authorized to sue as an institution. Accordingly, the Court distinguished this case from Raines v. Byrd, in which the Supreme Court held that Senator Byrd and other individual members of Congress failed to establish that their claimed injury was "personal, particular, concrete and otherwise judicially cognizable." The court also emphasized that the non-appropriation challenge concerns the constitutional role of Congress, not the implementation of a law. If money is drawn from the Treasury without an appropriation, the court found that the House sustains a concrete and particular institutional injury not shared by the public as a whole, or even by an individual member.

The Court also rejected the Administration's contentions regarding justiciability and political questions, concluding that "the claims for which the House has standing involve pure questions of constitutional interpretation, amenable to resolution by this Court."

Potential Impact

According to the most recent HHS data, more than 56% of Marketplace enrollees receive CSRs. CSRs are particularly significant in non-Medicaid expansion states, where some individuals that would otherwise be newly eligible for Medicaid are instead eligible for CSRs. If successful, however, this suit should not eliminate CSRs. Insurers would still be obligated under the ACA to offer plans with CSRs to eligible individuals but the mismatch in funding sources could negatively impact the Marketplace in a number of ways. For example, insurers might try to raise premiums for all silver plans offered on the Marketplace to cover the additional cost of CSRs, and/or try to raise premiums on other products in some or all markets, to the extent that market forces and/or state law would permit it. Premium increases could have a spillover effect on the federal government by affecting premium support tax credits. For instance, in 2014, 95% of silver plan enrollees received premium support tax credits, meaning that the price of silver plan premium hikes would largely be borne by the government. Alternatively, some insurers may elect to pull out of some or all of the affected markets.   

Another possibility is that insurers would file lawsuits against the government in the Court of Federal Claims, although such lawsuits would be expensive, time consuming, and of unclear viability if the House lawsuit undercuts the funding for the payments at issue.

Next Steps

As expected, the Administration sought an interlocutory appeal of the decision and a stay of district court proceedings. On October 19, 2015, the court denied the Administration's motion seeking interlocutory review, concluding that an immediate appeal of the standing question would not "materially advance the ultimate termination of the litigation," as the court was likely to rule on the merits before the U.S. Court of Appeals for the D.C. Circuit would have ruled on standing. Therefore, this case will proceed to the merits in federal district court. However, once the court has ruled on the merits, an appeal could proceed covering both the standing and merits questions.

As a policy and political matter, the case creates as much peril for Congress - particularly on the Republican side of the aisle-as for the Administration, much as King v. Burwell would have (See our previous coverage of the decision). Millions of Americans now have health care coverage, which would be negatively affected were the House to prevail. In the context of the upcoming 2016 election, the case  could be  a "double edged sword."

For additional information, please contact John Hellow or Jasmin Niku in Los Angeles at 310.551.8111; Katrina Pagonis in San Francisco at 415.875.8500; Mark Johnson in San Diego at 619.744.7300; or Bob Roth, Marty Corry or Keith Fontenot in Washington, D.C. at 202.580.7700.

For media assistance, please contact Maura Fisher at 202-580-7714.