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Justice Department will appeal decision in Affordable Care Act case

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The Department of Justice will appeal a judge's ruling that the Obama administration is unconstitutionally funding part of the Affordable Care Act, a department spokesman confirmed Friday.

The announcement was expected. It follows a federal judge's decision Thursday to side with House Republicans in their lawsuit against the administration.

House Republicans alleged in that lawsuit that the administration illegally spent money that Congress never appropriated for the ACA's cost-sharing provisions. Those provisions include reduced deductibles, copayments and coinsurance many Americans receive, depending on income, for plans purchased through the ACA's insurance exchanges.

About 56% of Americans who receive coverage through ACA's insurance exchanges — about 5.6 million people — got cost-sharing reductions as of June 2015, according to the CMS.

U.S. District Judge Rosemary Collyer, who made the decision, stayed her ruling pending an appeal, so her decision won't go into effect as long as the matter is on appeal.

That means the decision won't likely affect insurance rate-setting or participation for 2017, though it does create some uncertainty in the long run for insurers. Shares for four of the nation's major insurers and a number of large hospital chains all dropped Thursday.

If the ruling were to be upheld by the appeals court and/or the U.S. Supreme Court, it might lead insurers to raise their premiums to compensate for the lost money. That, in turn, would likely trigger an increase in tax credits the government now allows Americans to help them afford their premiums.

Another possibility if Congress refused to appropriate the money is that insurers would seek relief in the U.S. Court of Federal Claims. Yet another possible outcome is that Congress would start appropriating the money each year. That, however, could complicate insurers' annual rate-setting process because they often have to set rates before the appropriations process concludes, said Tim Jost, a law professor at Washington and Lee University.

Legal experts agree that the appeals court will likely closely examine the issue of whether House Republicans even have standing to sue the administration. Judge Collyer surprised many last year when she ruled that House Republicans did have standing to sue.

Lisa Schencker writes for Modern Healthcare, a sister publication of Business Insurance.