New York Attorney General Eric Schneiderman immediately indicated Thursday night he intends to use the courts to fight the decision. | Frank Franklin II/AP Epic legal battles shaping up over Trump's scrapping of Obamacare subsidies

President Donald Trump's move to cut off critical Obamacare subsidies will almost surely be tied up in the courts for years as Democratic-led states seek injunctions, while insurers seek to recover payments they say they’re owed.

It's impossible to predict whether a judge might order the administration to continue the payments while the lawsuits are heard, but at least some legal experts express doubts.


“Forcing an administration to continue making payments when the president believes there is no appropriation, and when Congress believes there’s no appropriation, would be a pretty extreme move by the court — even if it was a temporary measure," said Nicholas Bagley, a professor at the University of Michigan Law School who has written extensively about Obamacare legal issues.

The result is that consumers are likely to be caught holding the bag if their insurers bolt and their Obamacare markets teeter on the verge of collapse. Many will end up paying higher premiums to make up for the shortfall, estimated at $7 billion this year alone. And although most insurers have locked in commitments to participate in the Obamacare markets for 2018, some may re-examine those decisions.

Mike Consedine, CEO of the National Association of Insurance Commissioners, fears insurers may still flee the 2018 markets.

“The coverage map right now is by and large filled in, but it’s a pretty thin layer in most states where you have just one carrier in a lot of places,” he said. “It doesn’t take a lot of decisions to find yourself in a position where you have all or parts of states bare. ... The status quo is gone at least for the foreseeable future, and we don’t know what the world looks like.”

The subsidy payments are worth an estimated $7 billion this year and go directly to insurers to help offset out-of-pocket costs — such as co-pays and deductibles for low-income Obamacare customers. Without them, Obamacare insurers will still have to provide discounts to customers — they’ll just have to eat the added cost, which most will attempt to recover by increasing premiums.

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“The market can only take so many shocks,” said Ceci Connolly, CEO of the Alliance of Community Health Plans. “We had hoped that a business person would have understood the implications to the market, but that seems not to be the case.”

Obamacare customers are already contending with fragile markets. Nearly half of all counties have just a single insurer selling plans, and premiums are skyrocketing in many states. Trump’s decision to cut off the subsidy payments two weeks before open enrollment begins on Nov. 1 for Obamacare’s fifth enrollment season is sure to lead to further uncertainty by consumers as well as insurers.

“There was a lot of anxiety that we sensed from answering members’ phone calls and inquiries about what this means to them,” said Marti Lolli, chief marketing officer for Michigan’s Priority Health.

"There are no winners," Covered California Executive Director Peter Lee said on a call with reporters Friday, anticipating insurers will drop out of some markets and consumers will be priced out of coverage. "The impact could be devastating in many markets around the country."

No insurers immediately announced plans to exit the markets or file suit in the hours immediately after the announcement. That’s in part because many had already priced in the likelihood that the payments would disappear since Trump had been threatening to pull them for months. And most are still mulling their legal options, although legal experts say that lawsuits are a virtual certainty.

“I had hoped that the federal government would not cease these payments to insurers, an act that could create further instability in individual health insurance markets across the country,” New Hampshire Insurance Commissioner Roger Sevigny said. “However, New Hampshire prepared for such a contingency by allowing insurers to file rates that assumed these payments would not be made.”

New Mexico Health Connections is raising rates by an average of 50 percent next year, in part due to the expected loss of subsidy payments, which it relies on to reduce out-of-pocket costs for its poorest Obamacare customers.

“A lot of us anticipated it,” said Martin Hickey, the nonprofit insurer’s CEO, noting that federal premium subsidies will cover the higher costs for most Obamacare customers. “The federal government’s going to pay more for this. That’s the craziest thing.”

Connolly says her members made similar calculations. “Actuaries are conservative people, and in this instance it has probably served companies well," she said.

California, meanwhile, loaded the entire financial impact of the lost subsidies onto the price of silver-tier plans for 2018. Consumers won't feel the impact of the increased premiums because their tax-credit subsidies will rise accordingly. But taxpayers will still have to foot the bill for those increased subsidies, Lee noted.

Still, he said, "California is not insulated or immune from instability caused by national policies that have the effect of promoting uncertainty.”

The ramifications for insurance markets may not be fully felt until next year, when insurers will again weigh whether to sign contracts to offer Obamacare plans for 2019.

"We’re not going to let this go without a fight,” said Colorado Lt. Gov. Donna Lynne, a Democrat running for governor next year. As of Oct. 1, Colorado insurers were locked into participating in the market for 2018, although they'll now charge higher premiums. “We are really, really concerned.”

Even if many insurers and state regulators prepared for the worst, multiple lawsuits are likely.

Nineteen Democratic state attorneys general, including those from California, New York, Kentucky, Connecticut and Massachusetts, filed a lawsuit in the Northern District of California on Friday to keep the Obamacare payments flowing. They're seeking a judgment that the subsidy payments are lawful — and a broader injunction to keep the subsidies flowing to Obamacare insurers while the lawsuit plays out.

The lawsuit will argue that Trump is violating the Administrative Procedure Act by abruptly pulling the money and refusing to faithfully execute federal law, among other arguments.

“It’s about doing what’s right by our people,” said Kentucky Attorney General Andy Beshear, a Democrat whose state has a Republican governor opposed to Obamacare.

The most immediate venue for litigation is a lawsuit initially filed by House Republicans in 2014 arguing that the federal government Obama administration was illegally funding the subsidy payments. They prevailed at the lower court level, but that decision was appealed by the Obama administration. The case has been in legal limbo since Trump took office.

The Department of Justice filed a legal brief this morning announcing its intention to stop the payments, which presumably means it will drop the appeal. The Trump administration said it is prohibited from making the subsidy payments without a congressional appropriation, citing an Oct. 11 legal opinion from Attorney General Jeff Sessions, which argued that the text of the health care law should be interpreted strictly.

"Congress has the power of the purse, and it is up to Congress to decide which programs it will and will not fund," Sessions wrote. "When Congress refuses to appropriate money for a program, the executive [branch] is required to respect that decision."

Insurers are also almost certain to file their own lawsuits — likely through the Court of Federal Claims, which is set up to handle the cases of litigants who contend they’ve been stiffed by the federal government.

There’s already a raft of cases pending over another Obamacare program that was intended to shield insurers from the financial risks of attracting particularly sick, expensive customers since they were no longer allowed to question members about their medical histories. But the program experienced a shortfall of several billion dollars after congressional Republicans required it to be budget-neutral.

Most legal experts believe insures would have a strong case in seeking to recover the cost-sharing subsidy payments through that venue.

“I think insurers, if they sue over the cost-sharing payments, are going to win going home,” Bagley said. “I’ve heard nobody contest that even a little bit.”

Tim Jost, another Obamacare legal expert, is similarly bullish on insurers’ prospects. But that doesn’t mean there wouldn’t be financial pain, particularly for smaller insurers that might struggle to stay afloat.

“It would be a straightforward case,” Jost said. “The problem is that it would take years to wrap up.”

Under their contract with the federal exchange, insurers may terminate their participation if the subsidy payments are terminated but they are still subject to state laws, many of which limit their ability to withdraw. They may not terminate their exchange enrollees, for instance, unless they fail to pay their premiums, which many likely would do once an insurer left the exchange and premium tax credits were no longer available.

That could lead to financial headaches for insurers. Community Health Choice, for example, a nonprofit insurer based in Houston, estimates it will lose out on $25 million in funding in the final three months of the year.

“What really needs to happen is that Congress needs to appropriate the funds for 2018 and we need to have an adult conversation about how to move forward,” said Ken Janda, CEO of Community Health Choice. “All of those things are created by the current president and Congress to blow up the Affordable Care Act, and they have not come up with a reasonable replacement.”

Renuka Rayasam and Victoria Colliver contributed to this report.