Republicans have found a new part of Obamacare they think is illegal

House Republicans filed a lawsuit today challenging the legality of how the White House has implemented Obamacare. This is not a surprise: House Speaker John Boehner (R-OH) has been pursuing this case for months now.

But there is at least one unexpected feature of the House Republicans' suit against Obamacare, which you can read here: alongside the challenge to the employer mandate, it also argues that the White House is also breaking the law by giving insurance companies money that hasn't been appropriated by Congress.

Cost-sharing reductions, explained

(Shutterstock)

The government makes these payments to insurance companies for a little-known program called "cost-sharing reductions." These are subsidies that low-income people get to help cover the out-of-pocket costs above and beyond monthly premiums. Cost-sharing subsidies are used to cap how much Obamacare enrollees have to pay for co-payments, co-insurance, and other forms of cost-sharing.

The limit is on a sliding scale by income, so someone right at the poverty line would be expected to spend no more than $2,250 on out-of-pocket insurance costs. The cost-sharing reduction would kick in to cover anything above and beyond this. You can see how the cost-sharing limit goes up with income in this chart from the Kaiser Family Foundation.

The federal government pays the cost-sharing subsidy directly to the insurance plan. So if, for example, someone right at the poverty line had $3,000 in out-of-pocket costs, she would pay $2,250 — and the government would send along the other $750.

This is the money that the House is challenging in this new lawsuit.

House Republicans argue Treasury is sending out these subsidies illegally

While the Affordable Care Act authorized these cost-sharing subsidies when it was passed in 2010, the House lawsuit says it never appropriated the necessary funding to be sent over to Health and Human Services. Here's the relevant bit of the lawsuit on this issue:

Congress has not appropriated any funds for Section 1402 Offset Program payments to Insurers for Fiscal Years 2014 or 2015.

Notwithstanding the lack of any congressional appropriation for Section 1402  Offset Program payments, defendants Lew and the Treasury Department, at the direction of defendants Burwell and HHS, began making Section 1402 Offset Program payments to Insurers  in January 2014, and, upon information and belief, continues to make such payments.

The Office of Management and Budget ("OMB") has reported that Section 1402 Offset Program payments to Insurers for Fiscal Year 2014 were estimated to be $3.978 billion.

Later, the lawsuit argues that "the House has been injured, and will continue to be injured, by the unconstitutional actions of defendants Lew...which, among other things, usurp the House's legislative authority."

This is different from the "Obamacare bailout"

If House Republicans protesting payments to health insurers sounds familiar, it's because it happened this past winter — but those were a completely different part of the health care law.

Back in January, Republicans began sharply criticizing a so-called "Obamacare bailout" that transferred federal funds to private insurance companies. The bailout typically described three programs in the health care law — risk corridors, risk adjustment, and reinsurance — that make it less financially risky for insurers to participate on the Obamacare marketplaces.

this is not a challenge to the so-called "obamacare bailout"

These programs are really different from the cost-sharing reductions because they aren't tethered to any one enrollee's cost. They're paid out to insurers as a lump sum, mostly depending on if the health plan got stuck with really expensive, sick subscribers.

The cost-sharing subsidies are tethered to how much an insurer's enrollee earns, not how high their health care costs are. And if the Republican lawsuit succeeds, it would mean the federal government can't send payments to insurance plans to keep lower-income enrollees' out-of-pocket spending lower. Insurers would still, however, have to adhere to those limits — essentially leaving them to cover some of their poorer members' co-payments and co-insurance rather than the federal government.

Correction: An earlier version of this article said that the Republican lawsuit was challenging the the cost-sharing limits in Obamacare. It is challenging the subsidies that the the White House has administered to keep consumers under those limits, but not the actual cost-sharing caps themselves.

Contributions are a key part of the future of Vox

Readers rely on Vox for clear, nuanced coverage that not only illuminates the issues, but poses solutions, too. And we rely on help from our readers: Advertising and grants cover the majority of our costs, but we count on contributions to help us close the gaps in our budget. In fact, we’re looking to reach 95,000 individual contributions before the end of the year. Will you make the next contribution right now? Our average gift is just $20 — and it goes a long way in helping us keep our work free. Vox is here to help everyone understand what’s shaping the world — not just the people who can afford to pay for a subscription. We believe that’s an important part of building a more equal society. Join that mission by making a contribution today.

One-Time Monthly Annual

$5/month

$10/month

$25/month

$50/month

Other

$

Yes, I'll give $5/month

Yes, I'll give $5/month

We accept credit card, Apple Pay, and Google Pay. You can also contribute via