SAN FRANCISCO -- A federal judge in San Francisco refused Wednesday to block President Donald Trump's order to end government subsidies required by the Affordable Care Act.
U.S. District Judge Vince Chhabria, an Obama appointee, said Trump's action would create little harm because most states anticipated it and established measures to keep premiums stable.
Chhabria also said that Trump's action also may not have violated the law.
"Although the case is at an early stage, and although it's a close question, it appears initially that the Trump administration has the stronger legal argument," Chhabria wrote.
Trump said earlier this month that his administration would stop making monthly payments to insurers that reimburse them for reducing out-of-pocket costs, including deductibles and co-pays, for lower income Americans. The next federal payment to insurance companies was due on Friday.
Eighteen states and the District of Columbia sued, asking Chhabria to put a hold on Trump's order and warning it would trigger "chaos and uncertainty," raise the cost of insurance and the number of uninsured Americans and saddle state and local government with hefty, new expenses.
But Chhabria said Trump's decision to discontinue the payments would have little immediate effect because consumers will receive higher tax credits to make up for increased premiums charged for some plans.
A bipartisan deal reached last week by Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., would reinstate the payments for the next two years, but prospects remain uncertain for passage of that legislation.
Many conservative Republicans have opposed the legislation, saying that Congress should take no action to fix Obamacare, which they want to repeal.
Other Republicans have supported the compromise move, in part because the people most likely to be hurt by cutting off the insurance payments are a largely Republican constituency -- middle- and upper-income working people who do not get insurance coverage from an employer.
Trump has made conflicting statements about whether he would support the legislation.
The states challenging Trump's action argued that canceling the payments violated the Affordable Care Act, amounted to an "arbitrary and capricious" action in violation of the Administrative Procedure Act and breached "the president's constitutional duty to take care that the laws be faithfully executed."
"Congress both mandated that the payments be made and exempted them from the annual appropriations process by creating a permanent appropriation for these funds," the lawsuit said.
Lawyers for Trump countered that Congress had never appropriated the money for the payments and that ending them caused no immediate harm to the states.
"The harms that they allege are speculative; at best they will occur months or years from now, not next week," administration lawyers argued.
They also said the issue was already pending before the D.C. Circuit Court of Appeals in a similar case, and the states could ask that circuit court to block Trump's action.
The money at issue, known as cost-sharing reduction payments, has been one of the more controversial elements of the Affordable Care Act, denounced by Trump and other Republicans as a "bailout" for insurance companies.
In fact, almost the opposite is true -- the federal government will pay more to insurers without the cost-sharing payments than with them because of the way the health care law works, according to the nonpartisan Congressional Budget Office. Eliminating the payments would cost the government roughly an extra $20 billion a year, the budget office estimated in August.
In addition to raising the cost to the government, ending the payments would cause premiums to rise sharply in many states and could cause some insurers to quit the market altogether, officials in several states, patient advocates and insurance industry executives have said.
Although it was Democratic attorneys general who brought the case to court, the impact of cutting off the payments would be largest in Republican states, which have a higher share of consumers covered by the payments, according to insurance analysts.
Under the health care law, insurers are required to provide low-income customers with health plans that have reduced deductibles and co-pays. To reimburse insurers for the cost of doing so, the law provides for monthly payments "equal to the value of the reductions."
In 2014, after the health care law first took full effect, the Republican-majority Congress did not appropriate money to make those payments.
The Obama administration decided that the language of the law constituted a so-called permanent appropriation, which allowed it to make the payments without further congressional action, similar to the way many other government benefit programs are funded.
Republican lawmakers went to court and won a ruling last year from a district judge in Washington that the payments were illegal. That ruling has since been put on hold pending further action in the case before the D.C. Circuit.
Without the payments, insurers would still be required to offer health plans with low deductibles and co-payments. To make up for the cost, they are expected to raise premiums for some health plans.
The lawsuit was filed by attorneys general in California, Connecticut, Delaware, the District of Columbia; Illinois, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont; Virginia and the state of Washington.
(Dolan reported from San Francisco and Lauter from Washington.)
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