San Francisco judge declines to grant preliminary injunction restoring cost-sharing subsidies

- A federal judge in San Francisco today rejected a bid by California and 17 other states for a preliminary injunction requiring the administration of President Donald Trump to restore health-insurance subsidy payments.

U.S. District Judge Vince Chhabria said there was no immediate emergency because most states, including California, figured out a way to balance the loss of cost-sharing payments with higher tax refunds.

"The truth is that most state regulators have devised responses that give millions of lower-income people better health care options than they would have had otherwise," Chhabria wrote.

"The emergency relief sought by the states would be counterproductive," he said.

The cost-sharing reduction payments for insurance companies to subsidize health care costs for low-income consumers were provided under the Affordable Care Act of 2010, also known as Obamacare.

In 2016, they amounted to $7 billion and helped about 7 million people pay for doctors' visits and medical treatment.

The Trump Administration said it was ending the payments on Oct. 12. The 18 states, led by California, plus the District of Columbia sued in federal court in San Francisco the next day.

The administration contends the payments by the executive branch are illegal because the law doesn't include a permanent appropriation by Congress and Congress must therefore authorize funds each year.

The 18 states, all of which have Democratic attorneys general, and the previous Obama administration claim the wording of the law implies a permanent appropriation.

Chhabria wrote that the legal dispute is a close question, but said that at this early stage of the case, "it appears initially that the Trump Administration has the stronger legal argument."

In addition, he said, there is not enough imminent harm to people buying insurance for the 2018 year to justify a pretrial preliminary injunction. Enrollment for 2018 runs from Nov. 1 to Dec. 15.

Chhabria said any harm caused in future years by the termination of the payments could be addressed when he makes a final ruling in the case, which he said he is likely to do by early 2018.

California Attorney General Xavier Becerra said in a statement, "The case will continue, and the states will press for a permanent resolution of their lawsuit to require the administration to resume making the payments in compliance with the law.

"The actions by the Trump Administration undermine critical payments that keep costs of healthcare affordable for working families," he said.

The cost-sharing reduction payments are one of two ways the Affordable Care Act subsidizes health insurance for low-income consumers. The second way is the tax credits, which are paid at the same time people pay health insurance premiums, thus reducing the amount the consumers pay for the premiums.

In 2016, the government paid $32 billion in tax credits to help 10 Million people buy insurance on exchanges. The law specifies that the tax credits are a permanent appropriation.

The tax credits are tied to the cost of one of four categories of insurance plans - the silver plan, which has the second-lowest cost and the second-lowest level of coverage, paying for 70 percent of health care costs.

Chhabria said regulators in California and other states, anticipating the elimination of cost-sharing payments, figured out how compensate for the loss by allowing insurance companies to raise their rates only for the silver plan for 2018.

The higher premium rates for the silver plan increase the tax credit, so that low-income consumers can either keep their silver plans at similar prices or in some cases even move up to gold or platinum plans at a slightly lower cost than their previous silver plans. The higher plans pay 80 or 90 percent of a patient's health care costs.

Chhabria scheduled a status conference for Nov. 21 to discuss next steps in the lawsuit.

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