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Republicans face damage control because of House Obamacare lawsuit

Evan Vucci / AP

Trumpcare might be dead, but the Obamacare fight continues.

Next up: Republicans have to settle the future of Obamacare's subsidies to insurers — and the House lawsuit that's trying to get rid of them.

Why it matters: The deadline is quickly approaching for cleaning up a mess that Republicans created.

  • If the Trump administration decides to stop appealing a federal judge's ruling against the subsidies, the payments — called cost-sharing reduction subsidies — will stop, health insurers will lose billions of dollars, and the individual market could collapse because the insurers will have to keep helping low-income enrollees whether they're getting the payments or not.
  • Republicans could just drop the lawsuit and give the insurers the money, to prevent a meltdown. But their next chance is the short-term spending bill due at the end of April — which is already almost certain to be mired in a fight over Planned Parenthood funding and money to build a wall along the southern border. The subsidies could get added to that spending bill, but "only if insurers agree not to abandon the market in the next couple weeks," a senior GOP aide told me. And the payments could lead to a fight among Republicans, in addition to their likely battles over Planned Parenthood and the wall.

This is all the legacy of a lawsuit congressional Republicans filed when the Obama administration was running Obamacare — long before the White House changed hands.

Oops: Even before Trumpcare's failure, GOP aides acknowledged that the lawsuit seemed like a better idea at the time than it does now. Then, it was hard to ignore the awkwardness of Republicans potentially giving money to the insurers they've complained about for seven years. Now, they face the even more unpleasant prospect of helping stabilize a law they just failed to get rid of.

Kristine Grow, a spokeswoman for America's Health Insurance Plans, said the payments "are essential for the stability of the market." Deadlines for 2018 participation are quickly approaching within the next few weeks, she said, and "more clarity sooner rather than later would be tremendously helpful."

But there are real constitutional questions involved in the lawsuit, which is why this was a fight Republicans were poised to win and also why the House is highly unlikely to drop the case. The most likely scenario is that the administration drops the appeal, and Congress appropriates the money. But that's easier said than done, especially in the post-Trumpcare political climate.

The issue: The House says the administration is illegally paying insurers the cost-sharing reduction subsidies under Obamacare. These are payments made to insurers to reduce out-of-pocket costs for low-income enrollees.

While insurers clearly must pass along the help to enrollees by law, Republicans have argued Congress never actually gave the Obama administration the money for the program that's being used to pay insurers. A district court judge has sided with them, but the Obama administration appealed the case. It was delayed in February and is currently on hold, with an update due in May.

What this all comes down to: If the Trump administration stops fighting the case and the payments stop, insurers will lose $10 billion next year, according to a recent Congressional Budget Office report. Insurers are already having a hard time on the individual market, and a $10 billion loss could easily be enough to convince those still participating to leave at the end of the year.

Some of their problems were due to structural flaws in Obamacare, and insurers made errors in setting premiums. But they have also lost a lot of money after Republicans successfully blocked the government from making payments designed to help plans deal with risk.

If Republicans want to make sure the Obamacare markets "explode," as President Trump has predicted they will, their best course of action would be to leave the payments unfunded. But this is politically risky: People have a tendency to blame their problems on those in charge, and many people would surely lose coverage or see massive premium increases if the GOP goes this route.

The problem: Conservatives want to keep trying to repeal Obamacare, and appropriating the money could be dubbed as giving up. Rep. Mark Meadows, chairman of the hardliner Freedom Caucus, said earlier this year he supports making the payments, but only as long as they're part of a longer-term repeal and replace effort.

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