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ACA Update

By Tom Wood                                                                                         

Newswires and blogs have been reporting and commenting on President Trump’s announcement that he will stop the Obamacare subsidies and states’ lawsuits seeking to require the subsidies. Beyond the shallow reporting, petty politics, and fake news, what is this all about? I’ll tell you.

First, here’s a quick history – just the facts. Obamacare (ACA) was passed in 2010, and not without controversy but clearly without consensus. Republicans have vowed to repeal the ACA, defund it, challenge it in court, and then repeal and replace it. Repeal was never possible until President Trump’s election. Two challenges to the Supreme Court failed 5-4 and 6-3, with holdings that the individual mandate is a constitutional tax and reforming the Law so that certain subsidies applied to all participating insurers nationwide. Before President Trump’s election, that left one option: defund it; and they did that.

To defund the ACA, Republicans who controlled Congress did not appropriate money from Treasury for essential subsidies within the Law. It’s elementary that Congress controls the purse strings. No law is required to defund, just inaction. Payment of money from Treasury requires a Law, and the Executive (the President and his administration) executes its Power and statutory responsibility by making the payment from the appropriation or authorization. Congress may either permanently authorize spending by the Executive when creating a program or separately appropriate the funds for established programs. Since Republicans view the ACA as not permanently authorizing payments of subsidies they de-funded the ACA by refusing to appropriate funds for them, within the Power held by their control of the Congress.

The ACA includes these two subsidies: Section 1401 provides all taxpayers a tax credit for the cost of health insurance premiums, and Section 1402 requires participating insurers to offer discounts to low-income taxpayers and also requires the federal government to reimburse the insurers for the same amount of the discounts. These 1402 subsidies are the “cost-sharing reduction payments” or CRS Subsidies, paid directly to insurers, that President Trump announced he would stop. There is no appropriation authorizing these payments to the insurers, and the dispute has been whether the ACA itself authorizes or mandates that the Executive pay them.

The ACA was implemented in phases. In 2013, President Obama asked Congress to appropriate funds to pay the first year of CRS Subsidies to the insurers participating in the exchanges. When Congress declined to make the appropriation, President Obama funded the Subsidies without an appropriation, having them paid from Treasury. In response, the House sued to stop the subsidies, claiming they were illegal – not authorized by the ACA as authorizing legislation and not separately appropriated. In other words, the House (Republicans) have argued that the Subsidies are another unfunded mandate the Congress refuses to fund, which is its constitutional Power and prerogative as the holder of the “purse strings.” U.S. District Court Judge Rosemary Collyer of the District of Columbia has agreed with the House that it has standing to protect its constitutional Power of the Purse and that unless there is a new Law then the payment of these subsidies by the Executive to the participating insurers, is unconstitutional – illegal, but the court order was stayed pending appeal. The House and the Court have been waiting for President Trump’s decision because the dispute is between the two branches of government, not just between Speaker Ryan and Former President Obama.

Now, it’s 2017 (more than seven years after the ACA became Law) and for almost a year with majorities in both houses of Congress and the Presidency, Republicans have been unable to change the Law with legislation. In that time, President Trump has allowed these payments to continue during 2017 legislative efforts. President Trump’s announcement that he will rescind prior orders the House has been saying for years were never authorized or appropriated and, thus, unconstitutional as the court has found, means the President is rescinding what he has called President Obama’s illegal executive orders, as promised. President Trump is finally defunding the ACA, as Republicans promised and followed through on years ago.

In response to President Trump’s announced end to these payments without an appropriations Law, several states have sued to require the payments by the Executive, on essentially the same grounds rejected by Judge Collyer, which are arguments she said “strain[] credibility” and are “passing strange” and a “most curious and convoluted argument whose mother was undoubtedly necessity,” comparing some arguments to one trying to squeeze an elephant through a mousehole. Democrats picked California to launch their lawsuits. The issue is destined for the Supreme Court. With all of our checks and balances, it will again be up to 9 people to decide whether the ACA permanently authorizes payment of these CRS Subsidies as a permanent appropriation and not just an unfunded mandate as Judge Collyer found, using President Obama’s budget request for the 2014 appropriation as “the best evidence.”

Is defunding leverage for negotiations? Absolutely it is. Whether that is good or bad, or too soon or too late, are all opinions, but it is certainly nothing new. 

Does President Trump’s actions (or Republicans de-funding the ACA) undermine the ACA? Yes, that’s accurate just as promised by Republicans years ago. But it appears equally accurate that defunding the ACA is necessary to bring consensus on health care law in this country and that insurers are leaving the exchanges and health care and health insurance costs are rising for everyone, even with the Subsidies. The status quo in most if not all states is that there is no competitive open exchange market, and an unstable broader market. 

Did Democrats intentionally leave out the costs of subsidies in CBO scoring to sneak it through Congress in 2010. No, CBO scored the ACA by assuming it was fully funded. CBO’s scoring accuracy depends on what score you look at. The score to taxpayers is whether they have been able to keep their doctors, keep their plans, pay lower premiums and control costs, and have improved quality and access to care. For taxpayers who pay for their own health care or pay their own insurance premiums (and for those on these ACA exchanges even with the subsidies) because none of this is free, health care costs continue to increase exponentially.

The news is reporting that these subsidies help the people. However, the fact that subsidies may help people in the short run is not why they were ordered stopped nor reason to require that they continue without a bill appropriating the payment by the passage of a Law. Whether subsidies help citizens or taxpayers in the long run, may be more complicated to answer here as absolute fact. 

The ACA encourages the States to increase income thresholds for Medicaid qualification and mandates direct subsidies to insurers. Is this the answer to our health care system? There is no consensus that it is. The most recent news that the Senate has reached a temporary bi-partisan compromise, which President Trump has not fully endorsed, may be movement toward consensus, but it not consensus on a solution. Instead, it is kicking the can down the road through one more election cycle once again, and whether that is praiseworthy is mere opinion and clearly fodder for more very fake news, political fundraising, and shallow commentary.


Tom Wood is a health care lawyer based in Mobile, Alabama. He can be reached at, and on the web at



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