Taking the Nuclear Option Off the Table

Last Thursday, fifteen states and the District of Columbia moved to intervene in House v. Price, the case about the ACA’s cost-sharing reductions. At the same time, they asked the court to hear the case promptly.

This is a bigger deal than it may seem, and could offer some comfort to insurers that are in desperate need of it. Apologies for the long post, but the law here is complex and uncertain.

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When the House of Representatives sued the Obama administration a few years back, it argued that Congress never appropriated the money to make cost-sharing payments. The district court sided with the House and entered an injunction prohibiting the payments. The court, however, puts its injunction on hold to allow for an appeal.

The Trump administration has now inherited the lawsuit, and the health-care industry is waiting on tenterhooks to see what it will do. For now, the case has been put on hold. But if Trump drops the appeal, which he has threatened to do, the injunction would spring into effect and the cost-sharing payments would cease immediately, destabilizing insurance markets across the country. It’s the nuclear option.

If the states are allowed to intervene, however, they could pursue the appeal even if Trump decides to drop it. With the appeal in place, the injunction couldn’t take effect until the case is heard and decided.

What’s more, the states are very likely to prevail. Not on the merits: as I’ve written before, the House is right that there’s no appropriation to make the cost-sharing payments. But the D.C. Circuit is likely to be skeptical of the district court’s conclusion that the House of Representatives has standing to sue. That’s why the states want to court to decide the case quickly: they hope to get rid of the lawsuit once and for all.

Allowing the states to intervene would not eliminate uncertainty. The D.C. Circuit could always surprise us and affirm the district court’s decision. Premiums for 2018 would still have to rise in response to the risk that payments might stop sometime next year. And even if the House loses, the Trump administration might be tempted to stop making the payments anyhow—although it’s not clear that it has the legal authority to do so without going through the cumbersome process of withdrawing an Obama-era rule.

Still, insurers could breathe a bit easier. If the states are allowed to intervene, Trump couldn’t blow up the individual markets in a fit of pique.

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So can the states intervene? It’s tricky. The states think they meet the typical standard for intervening: they have an interest in the outcome of the proceedings (check), the parties don’t adequately represent their interests (check), and their motion is timely (more on that in a moment).

But the states are playing a little fast and loose. They’ve invoked the standard for intervening in the district court pursuant to Rule 24 of the Federal Rules of Civil Procedure. There’s no equivalent rule governing appeals (with a narrow exception not applicable here).

This may seem like a technical point. It’s not. If you want to participate in a lawsuit that’s already been filed, it’s your responsibility to intervene as soon as possible. If you wait until there’s an appeal, you’ve typically waited too long: As the D.C. Circuit has explained, “[i]t would be entirely unfair, and an inexcusable waste of judicial resources, to allow a potential intervenor to lay in wait until after the parties … have incurred the full burden of litigation before deciding whether to participate in the judicial proceedings.”

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But there are exceptions to every rule. As one of the leading procedural treatises says, intervening on appeal is “permitted in various circumstances that do not seem to threaten either the parties or orderly judicial process.” Because it happens so rarely, however, there aren’t well-developed rules about whether to allow intervention on appeal.

So let’s return to first principles. The idea behind intervention is that the courts shouldn’t decide cases that affect the rights of third parties without giving those parties a chance to be heard. At the same time, litigation would be a nightmare if every Tom, Dick, and Harry could throw his hat into the ring.

Courts try to strike a balance. They insist that third parties intervene as early as possible. They also don’t allow intervention if someone who’s already a party can be counted on to represent the third party’s interest.

That’s why the states couldn’t have intervened when the case was before the district court. The Obama administration was vigorously defending the constitutionality of the cost-sharing reductions, much as the states would have done. Their interests were aligned. Even after Trump’s election, it looked like the Justice Department would keep defending the payments—which is perhaps why an earlier effort to intervene in House v. Price was rebuffed.

Matters are very different today. Cementing his reputation as the world’s worst client, President Trump has publicly toyed with the idea of cutting off the cost-sharing reductions in an effort to force concessions from Democrats. His Attorney General has said that House’s claim “has validity.” Indeed, Politico reported late last week that Trump, over his adviser’s objections, wants to stop the payments altogether.

At this point, it’s nuts to think the states can count on the Trump administration to represent their interests. Those interests, moreover, are pretty clearly sufficient to give them constitutional standing to participate. Without the cost-sharing payments, millions of their residents could lose coverage, and they’d have to cover some of the health-care costs of the newly uninsured.

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Maybe this is the rare case, then, where late intervention is both necessary and appropriate. There’s an intriguing analogy here to Warren v. Commissioner of Internal Revenue, where the Ninth Circuit had asked Erwin Chemerinsky, a prominent constitutional law scholar, to submit an amicus brief on a tricky question implicating the Free Exercise Clause. Before the Ninth Circuit decided the case, however, the parties settled and moved to dismiss the appeal. To forestall that dismissal, Chemerinsky tried to intervene—much as the states are trying to do here.

The Ninth Circuit said no, but not because it believed that appellate intervention was categorically inappropriate. It reasoned, instead, that Chemerinsky wanted to introduce a new issue into the litigation (bad) and that he could always file a separate lawsuit to protect his interests.

Neither factor is present in House v. Price, however. The states aren’t trying to introduce a new issue at some late stage. They just want to pick up where the Obama administration left off. Plus, because the district court’s injunction would take immediate effect if the case was dismissed, the states can’t just file their own lawsuit to keep the money flowing. It’s this appeal or nothing.

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In general, there are good reasons to disfavor intervention in a pending appeal. But the D.C. Circuit will allow it “in an exceptional case for imperative reasons.” House v. Price is, in my judgment, one such case.

The change in administration has resulted in an unexpected change in one of the party’s litigating positions. The states haven’t sat on their rights: they’re jumping in at the first available opportunity. And the existence of the injunction means they can’t just file their own lawsuit to protect their interests.

We’ll see if the D.C. Circuit sees matters the same way. But I’ll be watching closely. If the states succeed, they’ll take the nuclear option off the table for the time being. That’d be some welcome news for the beleaguered Affordable Care Act.


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