A federal judge sided with House Republicans' lawsuit against Obamacare on Thursday — a significant victory for one of the last remaining legal challenges to the President Barack Obama's health law.
Former House Speaker John Boehner (R-OH) filed a lawsuit last July contending that the White House had broken the law by giving insurance companies money that Congress hadn't authorized.
DC District Court Judge Rosemary Collyer ruled Thursday that the House Republicans were right: The Obama administration does not have legal authority to provide low-income Obamacare enrollees with subsidies to help pay their deductibles and co-payments.
"Paying out Section 1402 reimbursements without an appropriation thus violates the Constitution," Collyer wrote in her decision. "Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one."
The ruling is not final; the Obama administration will near certainly appeal this ruling to an appellate court.
But if other courts were to find in the Republicans' favor, and the decision to hold, it would have sweeping implications, significantly reshaping the relationship between the executive and legislative branches and striking a significant blow against the people Obamacare was designed to help.
Cost-sharing subsidies, explained
The main way Obamacare helps people buy insurance is with subsidies that cover some portion of their monthly premium. But there's also a lesser-known program that helps low-income Obamacare enrollees pay for other insurance costs, like copays and deductibles.
These are called cost-sharing subsidies, and they're what the new Republican lawsuit challenges.
Obamacare enrollees who earn between 100 and 250 percent of the federal poverty line ($29,425 for an individual; $60,625 for a family of four) qualify for cost-sharing subsidies. About 65 percent of Obamacare enrollees fall into that category, according to research firm Avalere Health — and 5.9 million people currently use them.
The cost-sharing subsidies reduce enrollees' costs in two ways. First, people with cost-sharing subsidies get lower limits on their out-of-pocket maximums. The limit is on a sliding scale by income, and you can see how the cost-sharing limit goes up with income in this chart from the Kaiser Family Foundation:
Look at the second row, which covers people earning just above the poverty line: Their maximum out-of-pocket spending is $2,250 for an individual or $4,500 for a family. That's way lower than the limit for higher-income enrollees, the people in the last row of the chart.
Second, Obamacare requires insurance plans to craft different coverage plans for people buying with cost-sharing subsidies. These plans must cover a bigger chunk of an average enrollee's bills and usually do this with lower deductibles and copayments.
The average Obamacare plan for someone without a cost-sharing subsidy, for example, charges $318 for an emergency room visit. But for the lowest-earning Obamacare enrollees who do get cost-sharing subsidies (the people who earn between 100 and 150 percent of the poverty line), that drops to $168.
The same is true for deductibles.
Deductibles for people receiving the biggest cost-sharing subsidies are about one-tenth the size of those getting no help at all.
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 [Jack] Lew and the Treasury Department, at the direction of defendants [Sylvia] 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 [Treasury Secretary Jack] Lew … which, among other things, usurp the House's legislative authority."
This victory in Washington isn't the final word on the lawsuit. But it does allow it to move forward, and means that the legal battle over Obamacare — one that has already included four Supreme Court cases — still isn't over yet.