It turns out that the federal government cannot, in fact, order individuals or businesses to do something, then refuse to pay for it.
Several cases working their way through the U.S. Court of Federal Claims illustrate this point. One set involves the Affordable Care Act mandate that insurers reduce the out-of-pocket payments for lower-income customers buying policies on the Obamacare exchanges. The act also requires the federal government to reimburse insurers for these discounts, and here’s where the fire started.
Leading up to the start of the exchanges in late 2013, Congress — then partially controlled by Republicans opposed to the ACA — refused to provide money for the reimbursements. The Obama administration paid them anyway, using money the ACA itself had permanently appropriated to subsidize premiums for policies bought on the exchanges. The GOP-controlled House of Representatives sued, accusing President Obama of usurping Congress’ constitutional power over the federal purse. (Hmm, where have I heard that lately?) A federal judge in Washington, D.C., agreed, and President Trump halted the reimbursements in 2017.
A number of insurers sued, arguing that Congress was reneging on its statutory requirement to pay. And over time, as Nicolas Bagley of the Incidental Economist blog reports, jurists on the Court of Federal Claims have ruled in favor of three insurers’ lawsuits — including one that has been certified as a class action covering all insurers selling policies on the exchanges.
Per Bagley: “None of these judges bought the Justice Department’s rationale for refusing to pay. And good reason: it’s garbage. In the government’s telling, Congress never made a promise because it didn’t appropriate the money for cost-sharing payments. But it’s black-letter law that Congress can enter into a binding obligation, even if it doesn’t appropriate the funds to follow through on that commitment in the same statute. Congress might, for example, plan on appropriating the money at some later date. At any rate, the obligation stands until Congress changes course.”
The Justice Department is appealing. And the insurers’ claim for tens of billions of dollars in damages is clouded by the actions in California and numerous other states to mitigate the harm to insurers — and keep them and their customers from fleeing the exchanges. They found ways to load much of the cost of the lost reimbursements into higher premiums for federally subsidized consumers. Thanks to the subsidies’ design, when premiums go up, so does the size of the subsidies, shifting the cost from lower-income consumers to federal taxpayers.
Still, the refusal to appropriate the money to reimburse insurers in defiance of the statutory requirement has warped the system and damaged consumers and insurers. The day of reckoning is arriving.
Meanwhile, the American Federation of Government Employees has filed suit in the Court of Federal Claims on behalf of the thousands of federal workers who were forced to work without pay during the record-setting partial government shutdown that stretched from December 2018 to January 2019.
To which you say, “Wait, they all got back pay!” And they did, assuming they were employees and not contractors. But there are overtime claims to resolve as well as claims for damages — as anyone living on a tight budget can attest, having a couple of paychecks put on hold indefinitely is a traumatic experience.