House Challenge to Health Law Could Raise Premiums, Administration Says

Victory for House Republicans in federal court last week could mean significantly higher health insurance premiums for millions of people if the decision is upheld on appeal, the Obama administration said Monday.

And much of the cost for those higher premiums could be passed on to the federal government and taxpayers, administration officials and health policy experts said.

The ruling by Judge Rosemary M. Collyer of the United States District Court for the District of Columbia would block the administration from reimbursing insurers for discounts provided to millions of low-income people under the Affordable Care Act. Without that money, insurers would have to increase premiums for many people purchasing insurance through the health law’s online marketplaces, the administration said.

Judge Collyer said that the administration had paid billions of dollars to insurers since January 2014 even though Congress had not appropriated money for those subsidies, a violation of Article I of the Constitution, which states, “No money shall be drawn from the Treasury, but in consequence of appropriations made by law.”

The disputed money compensates insurers for the discounts, which make health care more affordable to consumers by reducing co-payments, deductibles and other out-of-pocket costs. If insurers are not reimbursed for the discounts, the administration said, they will need to charge higher premiums to cover their expenses.

A study by the Department of Health and Human Services estimated that premiums for midlevel “silver plans” could rise by nearly 30 percent without those reimbursements.

Many consumers would be protected, since under the law, they would be entitled to larger tax credits to help pay the higher premiums, the administration said. However, taxpayers would bear some of the extra costs. The Urban Institute, a nonprofit research organization, estimated additional spending would total $3.6 billion in 2016 and $47 billion over the next decade.

The administration plans to appeal the decision in the case, House of Representatives v. Burwell. The judge held off putting her decision into effect to allow for an appeal.

Clare Krusing, a spokeswoman for America’s Health Insurance Plans, a trade group, said: “We have a long judicial process ahead of us, so there’ll be no immediate change to anyone’s current benefit. But if you eliminate the cost-sharing subsidies, it would certainly increase the overall cost of coverage.”

Federal officials say the Affordable Care Act gave them permanent authority to help pay deductibles, co-payments and other out-of-pocket costs for certain low-income people who buy insurance through the new public marketplaces. The Congressional Budget Office estimated that these payments, known as cost-sharing reductions, would total $130 billion over the next 10 years.

But if insurers must rely on Congress to provide the money through annual appropriations, that would cause uncertainty in insurance markets, the administration said, noting that Congress was often late in passing bills to finance operations of the federal government.

In court papers, the Obama administration made this forecast: “If cost-sharing reduction payments were dependent on annual appropriations, insurers would be forced to set their premiums for the upcoming year in the face of uncertainty about the existence and amount of payments they would receive. That uncertainty would be inefficient and destabilizing. It would also inevitably lead to increased premiums.”

Josh Earnest, the White House press secretary, said he felt sure that the administration would ultimately prevail in court. Republicans will “stop at nothing to try to tear this bill down,” he said, “but I continue to be confident that they’re going to continue to fail.”

Administration officials said the ruling should not affect 2017 premiums.

The White House contends that the health care law, signed by President Obama in 2010, provides all the authority he needs to pay insurance companies for the discounts they give consumers. But in April 2013, Mr. Obama sought explicit authority, asking Congress to provide the money in one of the annual appropriations bills for 2014. Congress did not act on the request.

“Congress authorized reduced cost-sharing but did not appropriate moneys for it, in the fiscal year 2014 budget or since,” Judge Collyer said. “Congress is the only source for such an appropriation, and no public money can be spent without one.”

Nearly five million people, or 56 percent of those enrolled in health plans through federal and state marketplaces, were benefiting from cost-sharing reductions at the end of last year, the administration said.

Researchers at the Urban Institute also predicted that insurers would increase premiums for silver plans if they were no longer reimbursed for cost-sharing reductions. Premiums for such plans, they said, would increase about $1,040 a year per person, or 29 percent.

“If insurers have enough time to develop new rates, they could incorporate the increased costs into the premiums for silver plans,” said Linda J. Blumberg, a health economist at the Urban Institute. “But this takes time. You can’t change the rules in the middle of the year and adjust prices the next week.”

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