A U.S. District Judge has ruled that HHS unlawfully has spent billions of dollars to reimburse insurers for cost-sharing reductions granted to individuals who bought health insurance through an ACA Exchange such as Healthcare.gov. U.S. House of Representatives v. Burwell, D.D.C. No. 1:14-cv-01967 (May 12, 2016). The Court stayed its ruling pending review by the D.C. Court of Appeals.

As usual, the winning argument was simple – i.e., ACA § 1401 makes a permanent appropriation for premium subsidies but § 1402 cost-sharing subsidies are left to the annual appropriations process, and Congress has appropriated nothing. The government rehashed its King v. Burwell ambiguity arguments, but with far more difficulty. Among other things, the Administration previously had conceded that cost-sharing subsidies depend on annual Congressional appropriations.

If this decision stands, it’s very bad news for insurers participating in the ACA Exchanges, even if, as the Court suggested, they may be able to sue, under the Tucker Act, 28 U.S.C. § 1491(a)(1), to recover the promised payments from the government. The opinion does not address whether the subsidies already paid are subject to HHS claw-back.

But if this decision stands, and if Congress does not appropriate the missing funds, then Healthcare.gov may be doomed. Premium increases sufficient to overcome lost cost-sharing subsidies might accelerate an insurance death spiral that some believe already has begun.

In prior years, the forthcoming D.C. Court of Appeals decision would have been seen as a rest stop on the road to ultimate Supreme Court resolution. But with SCOTUS now split 4-4 on so many contentious issues, the D.C. Circuit may have the final word, perhaps late this year.