Last Thursday, May 12, 2016, Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia, ruled that the Obama Administration violates the Constitution’s Appropriations Clause when it reimburses health insurance companies for cost sharing reductions (CSRs) provided to low income enrollees who purchase qualified health plans (QHPs) on the health insurance exchanges established under the Affordable Care Act (ACA). Judge Collyer, who previously ruled that the U.S. House of Representatives had standing to challenge the expenditures, entered judgment in favor of the House and enjoined further use of unappropriated monies to fund CSR reimbursements, but stayed the injunction pending appeal. The Department of Justice has announced that it will appeal the case to the Court of Appeals for the District of Columbia Circuit.
The Constitution provides that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The district court’s decision turns on the constitutional difference between “authorizing legislation” – legislation that establishes or continues the operation of a federal program or agency – and “appropriation legislation” – legislation that provides legal authority for federal agencies to incur obligations and expend monies from the Treasury. As the court noted, “[a]n appropriation must be expressly stated; it cannot be inferred or implied.”
In an effort to make health insurance more affordable for low income individuals, ACA § 1401 establishes premium tax credits for certain low income individuals who purchase QHPs through an exchange, pursuant to a provision codified in the Internal Revenue Code, 26 USC § 36B. In addition, ACA § 1402 requires QHP issuers to provide CSRs – reductions in the amount of deductibles, coinsurance, copayments, or similar charges – to low income enrollees who purchase QHPs through the exchanges, and authorizes HHS to periodically reimburse QHP issuers for the CSRs they provide. The ACA provides an appropriation for the premium tax credits by amending 31 U.S.C. § 1324. Section 1324, a permanent appropriation for, among other things, refunds due from certain Internal Revenue Code tax credit provisions, now includes § 36B in the list of tax credit provisions for which funds are appropriated to pay refunds.
In House of Representatives v. Burwell, the district court rejected the textual and contextual arguments made by the Departments of Health and Human Services and Treasury that section 1324 also made appropriations for the CSR reimbursement payments. It noted the “well-understood principles of appropriations law” that appropriations “must be expressly stated” and that “a mere requirement to pay is not an appropriation.” The ACA “unambiguously appropriates money for Section 1401 premium tax credits but not for Section 1402 reimbursements to insurers. Such an appropriation cannot be inferred.” The court noted that the “Secretaries insist . . . that the Court should interpret ‘36B’ to include Section 1402 reimbursements,” but held that “[i]t cannot be done.”
On Friday, May 20th, the Federalist Society will host a teleforum conference call at 2:00 pm ET with Professor Josh Blackman, who will discuss the district court’s decision, as well as its outlook on appeal.