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A federal judge sided with the Trump administration on Wednesday in a ruling against 18 states that sought to compel the federal government to pay subsidies to health insurance companies for the benefit of millions of low-income people. (Pear, 10/25)

State attorneys general, all Democrats and led by Xavier Becerra of California, argued that the monthly payments are required under former President Barack Obama's health care law and cutting them off will harm consumers. The payments reimburse insurers for providing lower-income people with discounts on out-of-pocket costs. U.S. District Judge Vince Chhabria, an Obama appointee, said the states had devised workarounds to the lost subsidies that would give millions of lower-income people even better health care options. (Thanawala, 10/25)

Chhabria pointed out that most states’ insurance regulators had already prepared for a possible end to the money, by allowing companies to charge higher rates for the coming year. “Although you wouldn’t know it from reading the states’ papers in this lawsuit,” he wrote, “the truth is that most state regulators have devised responses.” (Goldstein and Eilperin, 10/25)

“If the payments were restored,” Chhabria said in the Wednesday order, “such a remedy would likely cause millions of lower-income people across the country who purchase insurance on the exchanges to be worse off than if today’s status quo is preserved.” (Rosenblatt and Harris, 10/25)

The states, led by California Attorney General Xavier Becerra, essentially torpedoed their own case through their innovative response to the president’s decision. Trump’s move to sever the funds prompted insurance companies across the country to re-file premiums with double-digit surcharges on top of the often hefty hikes consumers have borne under the 2010 health care law. California and others loaded those increases onto a certain category of plans — silver plans on the exchanges, the only plans that offer the subsidies. Because tax credits for premiums are based on the cost of silver plans — which the majority of consumers purchase — the higher premiums will also result in higher tax credits for consumers of bronze, gold and platinum plans. This means that consumers who don’t qualify for tax credits can purchase plans outside of the exchange for the standard rate, while others benefit from the increased premium assistance. Chhabria noted the quirk during a hearing Tuesday, pressing California attorney Gregory Brown to prove how the action hurts rather than helps consumers in the end. (Clason, 10/25)

The judge also appeared to be close to rejecting the states’ contention that Trump violated the law by discontinuing the payments. “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. (Dolan, 10/25)

“The fight for affordable healthcare moves forward,” California Attorney General Xavier Becerra said in a statement. “The actions by the Trump Administration undermine critical payments that keep costs of healthcare affordable for working families. The judge made clear in his ruling that the ACA is the law of the land. Without an emergency order halting the Trump action, swift action in this litigation becomes even more compelling.” (Colliver and Bettelheim, 10/25)

Gregory Brown, who represented California at the hearing, said the loss of the subsidies was creating “uncertainty and chaos” that could lead insurance companies to opt out of the health law. The administration had been making the monthly payments even as Trump threatened to cut them off to force Democrats to negotiate over health care. A bipartisan effort in Congress to restore the payments has run into opposition. (Thanawala, 10/25)

A spokeswoman for California Attorney General Xavier Becerra said Wednesday that the states will continue pressing for a permanent resolution to the lawsuit that they hope will require the administration to resume the payments. (Ho, 10/25)

The government payments reimbursed insurers for providing subsidies to some low-income consumers for out-of-pocket costs, including deductibles and copays. Insurers are required by the ACA to provide these cost-sharing subsidies and about seven million people who buy health plans on the ACA’s insurance exchanges get them. President Donald Trump announced earlier this month that he would end the subsidies as of Oct. 18 because Congress never appropriated money for the program. The payments are estimated at $7 billion in 2017. (Kendall and Armour, 10/25)

The suit claimed the administration violated federal law when it ordered the end of the CSR payments. It argued the ACA appropriated funding for the subsidy payments and that Congress doesn't need to renew that appropriation periodically. But the federal government argued that Congress never appropriated funds for the CSRs. If Congress doesn't appropriate money for a program, the Constitution prohibits the executive branch from spending money on it. (Livingston. 10/25)

Some experts and states are concerned jumpy insurers will bolt from the market and leave some regions with minimal or no choices for coverage. However, a bipartisan bill in Congress would restore the cost-sharing subsidies and aims to stabilize the insurance markets. But it’s not clear the bill will muster the support it needs to pass both the Senate and House or whether Trump would sign it. (Nguyen, 10/25)

Congress could still decide to appropriate the payments, and there is some bipartisan agreement that they should be made. Bipartisan legislation funding the payments for two years has been introduced in the Senate by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.). (Weixel, 10/25)