The election of Donald Trump and the Republican Party’s retention of both houses of Congress make the repeal and replacement of the Affordable Care Act (ACA) likely. The incoming administration now has the responsibility for dealing with the ongoing appeal of a successful challenge to the Obama administration’s application of the ACA’s cost-sharing subsidy program.

In House v. Burwell, the House of Representatives claimed that the Obama administration unlawfully made billions of dollars in payments to reduce ACA insurance costs without an appropriation from Congress. The case centers on ACA section 1402, which requires insurance companies to reduce the out-of-pocket costs (deductibles, co-payments, and co-insurance) of ACA-exchange enrollees in so-called “silver” plans who earn incomes less than 250 percent of the federal poverty level. Approximately 7 million people—or 57 percent of exchange enrollees—are receiving such cost-sharing reductions from insurers. Section 1402 directs the federal government to offset the financial burden to insurance companies via cost-sharing reduction payments (CSRPs), but the ACA doesn’t include an appropriation to pay for them. When the Obama administration’s FY2014 budget request asked for a current appropriation for CSRPs, Congress turned it down. Instead, Congress passed and the president signed an Appropriations Act that failed to appropriate any monies for CSRPs. Undeterred, the administration spent $2.8 billion dollars to reimburse insurers in 2014. The House sued.

After finding last year that the House has “standing”—the right to pursue a judicial remedy—District Court judge Rosemary Collyer this year found that the administration violated the constitution’s appropriations clause. Collyer enjoined the administration from making further payments, but stayed her ruling pending appeal. The U.S. Court of Appeals for the District of Columbia Circuit approved the House’s request to delay further action in the case until a February 21, 2017—after Trump is sworn in.

ACA repeal will not relieve the incoming administration of the need to decide whether to continue the appeal. Millions of people have already signed up for 2017 exchange plans with premiums calculated based on receipt of ACA subsidies. Immediate ACA repeal through the reconciliation process without any delay or replacement would remove those subsidies and leave the market in chaos. Most Republican policymakers are therefore proposing to delay implementation of repeal for a year or two. This will give the market time to adjust while a replacement plan is enacted.

The Burwell case poses two important issues for the Trump administration. The first is legal: what to do about a ruling that gives Congress “standing” to sue the executive branch? Article III of the Constitution limits courts to hearing only “cases or controversies.” A plaintiff must demonstrate it suffered a concrete, particularized injury in order to seek legal redress. Judge Collyer found the House had adequately alleged injury to its constitutionally protected interest as the only body empowered to direct expenditures from the U.S. Treasury. The Obama administration argued the that House lacks standing because its lawsuit is actually about a non-justiciable dispute between the president and Congress over the interpretation of the ACA that should be resolved through the political tools Congress has at its disposal. Yet Congress already exercised its political tools by passing an appropriations bill rejecting the administration’s request for a cost-sharing appropriation. Additional legislation limiting expenditures that Obama would have vetoed or ignored would have been fruitless. And no one would have welcomed an impeachment proceeding over this issue.

This is the first time a single house of Congress has been granted standing to sue the executive. Most administrations wouldn’t want to leave this potential curb on presidential power and prerogatives intact. If the administration withdraws the appeal, Collyer’s ruling stands, though the decision of a District Court is of limited precedential value. If Trump pursues the appeal, the standing decision might be reversed, but it could also be affirmed, creating a more important Court of Appeals precedent.

Trump must also consider another important issue relating to Burwell: what to do about the CSRPs? The Congressional Budget Office estimates the subsidies will cost $9 billion in 2017. Collyer’s decision enjoined payment of CSRPs without an express appropriation from Congress. If her decision on this issue is appealed and reversed, the Trump administration could pay CSRPs without going back to Congress—an outcome that will infuriate Congressional Republicans. If her decision is affirmed, or stands because the appeal is withdrawn, insurers will face huge losses. Insurers could sue the federal government to recover cost-sharing subsidies. But that is an expensive, time-consuming burden with uncertain results. Insurers might try to leave the market or increase premiums, but this may not be allowed under 2017 marketplace contracts and state laws.

The guerilla legal warfare against the ACA has left Trump with a dilemma. The best strategy is probably to withdraw the appeal and obtain a 2017 CSRP appropriation from Congress. This will give his administration time to hammer out a repeal-and-replace strategy without insurance market upheaval and financial fallout. It will also allow him to sidestep establishment of an appellate court precedent on Congressional standing that could come back to hamper him or future presidents.

Photo by Drew Angerer/Getty Images


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