Intervenors File Last-Ditch Effort to Revive House of Representatives v. Burwell

December 20th, 2016

Once the D.C. Circuit granted the House of Representatives motion to hold their Obamacare suit in abeyance, over the administration’s objection, I had all-but-assumed the litigation would soon draw to a close. Andy Pincus and his colleagues at Mayer Brown had other ideas. Today, the firm filed a motion for leave to intervene on behalf of Gustavo Parker and La Trina Patton, two Californians who purchased Silver plans on the ACA exchanges.

What is their argument? They are afraid the House of Representatives and the Trump Administration will (gasp) settle the case!

An agreement between the new Administration and the House to al- low the District Court’s injunction to take effect—either by dismissing this appeal or by entering into a settlement providing that the injunction will take effect at some specified time in the future—will produce devastating consequences for the individuals who receive these reductions, as well as for the Nation’s health insurance and health care systems generally.

I’m old enough to remember when “Sue and Settle” was a favorite tool on the left–though this doesn’t quite fit into the mold.

What would the consequences be of such a settlement?  Mayer Brown explains:

Recipients of the cost-sharing reductions who purchased health care insurance policies for 2017 will likely face early termination of those policies, because the federal government permits insurers to leave the exchanges in the event cost-sharing reimbursement payments cease. (The laws of some States might prohibit insurers from leaving the exchanges or otherwise prohibit early termination of policies, but it is not at all clear how those laws would apply in a situation in which barring termination could risk insurer insolvency.) Even if the policies are not terminated, cost-sharing reduction recipients face significant injury, because insurers may not be able to afford to continue to pay health care providers in the absence of reimbursement by the federal government.

Whatever happens with respect to 2017 health insurance policies, elimination of the reimbursements means that insurers are highly likely to exit the market at the end of that year in order to avoid the obligation to pay un-reimbursed cost-sharing reductions. That would mean higher cost or unavailability of health insurance for future years.  Movants will be injured substantially if the district court judgment is permitted to enter into effect.

Specifically, the beneficiaries would stand to be injured if the payments are halted:

Movants are beneficiaries of the ACA marketplace exchanges and of the cost-sharing reductions provided pursuant to Section 1402. They sus- tained an injury-in-fact when the district court enjoined cost-sharing re- duction reimbursements under Section 1402 because the injunction, if en- forced, will increase Movants’ financial burdens—as well as subject Mo- vants to the likelihood that health insurance will not be available in future years as a result of the inevitable destabilization of the marketplace ex- changes. As the health insurance industry explained in its amicus brief in this Court, the cessation of cost-sharing reimbursement threatens “poten- tially massive disruption to both issuers and enrollees.” AHIP/BCBSA Amicus Br. 21.

That Movants will suffer cognizable harms is an incontestable eco- nomic fact. The only uncertainty is how they will be harmed—which de- pends in large part on when the cost-sharing reimbursements are termi- nated—but under any scenario, the harm will be severe.

Insurers may exit the exchanges early if the subsidies were cut off. (This was a special concession the insurers obtained when negotiating their 2017 rates).

Movants then could well have their 2017 health insurance policies terminated. The Center for Medicare and Medicaid Services, which re- quires exchange insurers to enter into an annual agreement, amended the 2017 agreement to acknowledge that insurers could seek to leave the ex- change mid-year should the House of Representatives prevail in this law- suit.6

6 See Qualified Health Plan Certification Agreement and Privacy and Se- curity Agreement Between Qualified Health Plan Issuer and the Centers for Medicare & Medicaid Services 6 (Sept. 1, 2016), available at Downloads/Plan-Year-2017-QHP-Issuer-Agreement.pdf.

The American Academy of Actuaries predicted insolvency in the event that the CSR payments are halted:

premiums will be too low to cover the costs of care. This creates the potential for insurer losses and solvency concerns. Due to contract provisions, insurers would be permitted to withdraw from the market if [cost-saving subsidy] reimbursements are not made. The prospect of losses and increased solvency risks could lead to insurers opting to withdraw, leading to severe market disruption and loss of coverage among individual mar- ket enrollees—both those receiving [cost-saving] and those not.

The brief asserts that the intervention is necessary in light of a presidential reversal–the change from Obama to Trump:

Until recently, Movants’ interests were aligned with the interests of the Executive Branch, which has advocated for a construction of Section 1324 that permits the continued payment of the cost-sharing reimbursements to insurers. But the statements in the House’s recent motion indicate that the Executive Branch could well change position after January 20, 2017, and enter into an agreement to dismiss the appeal or otherwise agree that the District Court’s injunction may take effect. Movants appear here to defend their interest in continued payment of the cost-sharing reimbursement and therefore respectfully re- quest that this Court permit them to intervene.

The motion affirmatively asserts that “Sue and Settle” cannot be used to resolve this case:

But the House and the new Administration may not accomplish that goal by simply agreeing to allow the district court’s injunction to take effect in the face of a motion to intervene by parties with standing to press the position currently advocated by the Executive Branch. That would allow the substantial interests of third parties to be affected adversely through judicial action as to which those third parties seek to be heard, rather than through the exercise by Congress and/or the Executive Branch of their own constitutional authority.

I’ve read the final sentence in that passage three times, and I still don’t understand what it means. Why can’t a new Congress and Executive Branch decide for itself what a statute means? This reversal is especially appropriate because the Obama Administration’s interpretation is, as Nick Bagley pointed out, indefensible.

At bottom, this motion to intervene is a last-ditch effort to force the D.C. Circuit to keep insurers solvent and the Obamacare exchanges open for business.

Josh Gerstein points out that “no corporate or organizational affiliation” was provided for either intervenor, and Pincus “said his firm is handling the matter pro bono.” I should note that Pincus and his colleague Brian Netter filed a brief on behalf of America’s Health Insurance Plans (AHIP) in King v. Burwell.

I imagine insurance companies have a strong interest in the outcome of this suit. Indeed, Footnote 4 teases out what would happen if the administration interpreted the ACA to preclude the payments of the cost sharing reimbursements:

The President could direct the relevant agencies to interpret Section 1324 not to provide a permanent appropriation for the cost-sharing reimbursement payments. That too would render this case moot, although it might give rise to another lawsuit challenging the new interpretation of Section 1324.

It “might” huh? This intervention is but a mere prelude to a future suit by AHIP, seeking a TRO to prevent the stoppage of the CSR payments.

The Mayer Brown brief even flags a point from AHIP’s brief, that requiring insurers to continue offering insurance policies, without a reimbursement, would give rise to a taking!

Alternatively, even if Movants’ coverage is not terminated, insurers likely would seek judicial relief from their obligation to continue advancing cost-sharing without reimbursement. The industry’s amicus brief observes that requiring continued payments by insurers “would foist upon issuers an unfunded mandate that amounts to an unconstitutional taking.” AHIP/BCBSA Amicus Br. 24; see also Linda J. Blumberg & Matthew Buettgens, The Implications of a Finding for the Plaintiffs in House v. Burwell 8 (Urban Inst. Jan. 2016) (“Implications”) (an immediate cessa- tion of the reimbursement payments to insurers would cause them “to choose among incurring significant near-term financial losses, abruptly leaving the Marketplaces, filing their own legal actions against the federal government, potentially violating notice requirements for exiting the Mar- ketplaces, and causing enormous disruption to their enrollees”), available at plaintiffs-house-v-burwell.

This cursory argument would make even Richard Epstein cringe:

Prudence counsels in favor of a similar approach here in light of the potential “destabiliz[ation]” of the Exchanges and the ramifications for the broader individual market. REALIZING HEALTH REFORM’S POTENTIAL 9, supra. That is particularly true given that affirmance of the district court’s ruling, in conjunction with a lack of annual appropriations, would foist upon issuers an unfunded mandate that amounts to an unconstitutional taking. See Student Loan Mktg. Ass’n v. Riley, 104 F.3d 397, 403 (D.C Cir. 1997) (explaining that it “would largely gut the takings clause” if persons “earlier” provided “forms of financial incentives” by the government “were to wake up and discover that the government could subject them to a special tax”); cf. Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 348 (1936) (Brandeis, J., concurring) (interpreting statutes to avoid constitutional difficulties).

One of the very first decisions the Trump Administration will have to make concerns House of Representatives v. Burwell and the CSR payments. As I understand it, the payments are made to insurance companies monthly. At some point soon, the DOJ will have to determine whether the payments are lawful (adopting the Obama Administration’s interpretation), or determine they are illegal (rejecting the Obama Administration’s position).  If the executive branch chooses the latter route, payments will have to stop within a month. Unless Congress takes quick action to appropriate funds for the CSR payments, indeed insurers may exit the exchanges, possibly for 2017, and more likely for 2018.  If Trump decides to continue making these illegal payments, I will be the first to scream shenanigans, and file a brief I thought I would no longer have to file.

If Congress simply repeals Section 1324 as part of the reconciliation package, all of this litigation goes away. As the intervenors note in FN 4:

Congress could enact and the President could sign a law expressly precluding such expenditures. That would render this case moot and require this Court to vacate the decision below and remand the case to enable the district court to dismiss the action as moot.

The chapters for Undone continue to write themselves.  I’m sure John Roberts will find a way to break my heart, yet again.