US District Court for DC Rules Payment of Some ACA Subsidies are Unconstitutional without Separate Appropriation

The U.S. District Court for the District of Columbia has ruled that certain Affordable Care Act subsidies designed to reduce deductibles, co-pays, and other means of “cost sharing” by insurers cannot be paid unless they are separately appropriated by Congress.  U.S. House of Representatives v. Burwell, et al., (2016, DC DC), Civil Action No. 14-1967 (RMC).

The case involves two sections of the Affordable Care Act: 1401 and 1402. Section 1401 provides tax credits to make insurance premiums more affordable, while Section 1402 reduces deductibles, co-pays, and other means of “cost sharing” by insurers. Section 1401 is codified at 26 U.S.C. 36B (in the tax code) and was funded by adding it to a preexisting list of permanently-appropriated tax credits and refunds.

Section 1402 was not added to that list. The court ruled that Section 1402, which is codified in Title 42, which includes federal laws concerning “Public Health and Welfare” cannot be funded through the same, permanent appropriation as Section 1401. Instead, Section 1402 reimbursements must be funded annually.

The Court ruled that by paying out the subsidies without the necessary appropriation, the Administration violated Article I, Section 9, clause 7 of the  U.S. Constitution, which provides that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . . .”

The Court enjoined payment of the reimbursements, but stayed its ruling pending appeal.  Therefore, the short term effect is that that reimbursements will continue while the case is on appeal.  A decision from the US Court of Appeals for the DC Circuit on appeal will likely take months.

More …   U.S. House of Representatives v. Burwell, et al., (2016, DC DC), Civil Action No. 14-1967 (RMC).

Author: Erwin Kratz

Erwin Kratz practices exclusively in the areas of ERISA and employee benefits law, focusing on tax and regulatory matters relating to qualified and nonqualified deferred compensation and welfare benefits.