California Sues Trump Administration Over Obamacare Payments

1 min
California Attorney General Xavier Becerra (Brendan Hoffman/Getty Images)

California's attorney general filed a lawsuit Friday against the Trump administration over President Donald Trump's decision to stop paying insurers federal subsidies that help some consumers afford their health care.

Trump has been threatening for months to end the so-called cost sharing subsidies, which totaled about $7 billion this year. The payments, made by the federal government, help reimburse insurance companies for discounts on co-payment and deductibles that they have to give to low-income customers by law under the Affordable Care Act.

Withdrawing the payments could put insurance companies in some states in the red, pushing them to exit the Obamacare marketplaces.

"This is patently a decision that is reckless," state Attorney General Xavier Becerra said. "It is sabotage plain and simple."

The President is constitutionally required to execute the laws of the United States in good faith, Becerra argued, including the Affordable Care Act. Moves that could undermine the health insurance markets, he reasoned, are unconstitutional.

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"It's long past time that President Trump learned that he doesn't just get to pick and choose which laws he'll follow or which bills he'll pay," Becerra said.

California filed the complaint in federal court on Friday, with 17 other states and the District of Columbia joinining the lawsuit.

"There are no winners in these policies prescriptions. The impact can be devastating around the nation," said Peter Lee, executive director of Covered California, the state's Affordable Care Act marketplace.

But other states' marketplaces are likely to be affected by the subsidy cuts more than California, he added, because of a workaround the state put in place in anticipation of the funding cuts.

Covered California directed health insurers to add a surcharge to the monthly premiums of some plans to make up for the subsidy  cuts. But, because of the formulas for calculating consumer tax credits, that surcharge won't be passed on to consumers. Their monthly tax credits will go up in equal measure to the rise in premiums.

That means consumers won't forego health insurance because of a high price tag, and that will maintain a robust, attractive market that health insurance companies will want to do business in, Lee said.

Still, California is taking the lead on behalf of other states in challenging the decision to cut the funds.

"Nearly everyone -- from California to Maine -- has family who can't afford health care," Becerra said. "Without the Affordable Care Act and its subsidies for these families, millions more would be left in the cold without coverage."

California has already sued Trump multiple times for other policies, including a new challenge this week to the president's latest travel ban.

Becerra said the state has "taken the Trump administration to court before and won, and we're ready to do it again."

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