The irrational funding structure of ObamaCare has long been demonstrated. According to a federal judge, at least part of it is also unconstitutional. The Obama administration lost in court this afternoon when the judge ruled in favor of the House of Representatives in a lawsuit challenging the funding of subsidies for insurers in the exchanges — potentially stopping $175 billion in subsidies:

BREAKING: Federal judge rules Obama administration is unconstitutionally spending to fund president's health care law.

— The Associated Press (@AP) May 12, 2016

House Republicans had brought the challenge to subsidy spending, claiming it needed to be appropriated through Congress:

Judge rules in favor of Congressional GOPers on Obamacare lawsuit. Judge says Admin can't spend Obamacare $ not appropriated by Congress

— Chad Pergram (@ChadPergram) May 12, 2016

National Law Journal’s Zoe Tillman has more:

The Obama administration unlawfully paid billions of dollars to insurance providers under the Affordable Care Act without a funding appropriation from Congress, a federal district judge in Washington ruled on Thursday.

The insurance subsidies were designed to offset discounts that insurers were required to give eligible lower-income Americans under the health care reform law. U.S. District Judge Rosemary Collyer said federal agencies could not fund the subsidies through another section of the health care law that allocated money for tax credits.

“Paying out Section 1402 reimbursements without an appropriation thus violates the Constitution,” Collyer wrote. “Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one.”

That could mean an even faster destabilization of the irrational model at the heart of ObamaCare, of which more in a moment. The preliminary ruling on standing distinguished between subsidies paid to consumers in the exchanges (section 1401), which are statutory obligations through federal tax law, and those paid to insurers (section 1402), which are not part of tax law at all:

Properly understood, however, the Non-Appropriation Theory is not about the implementation, interpretation, or execution of any federal statute. It is a complaint that the Executive has drawn funds from the Treasury without a congressional appropriation—not in violation of any statute, but in violation of Article I, § 9, cl. 7 of the Constitution.17 The NonAppropriation Theory, in other words, is not about how Section 1402 is being applied, but rather how it is funded.

The issue, in other words, was that the executive branch had usurped the power of the purse. HHS argued that the House could have simply cut off funding for 1402 in explicit language, leading the judge to quote the House response that HHS was “apparently oblivious to the irony.” In order for the power of the purse to be a practical check, it has to be effective — and that’s exactly what HHS’ actions undermined:

The Secretaries further argue that the House is not injured by the lack of an appropriation because it can remedy or prevent that injury through means outside this lawsuit. Id. at 19-20. Chief among those means, they contend, is “the elimination of funding.” Id. As the House points out, the Secretaries are “apparently oblivious to the irony” of their argument. Opp’n at 35. Eliminating funding for Section 1402 is exactly what the House tried to do. But as the House argues, Congress cannot fulfill its constitutional role if it specifically denies funding and the Executive simply finds money elsewhere without consequence. Indeed, the harm alleged in this case is particularly insidious because, if proved, it would eliminate Congress’s role via-a-vis the Executive. The political tug of war anticipated by the Constitution depends upon Article I, § 9, cl. 7 having some force; otherwise the purse strings would be cut.

The Court finds equally unpersuasive the argument that Congress “could repeal or amend the terms of the regulatory or appropriations authority that it has vested in the Executive Branch.” Mem. at 19.23 But the authority trespassed upon under the Non-Appropriation Theory is not statutory; it is constitutional. It was not vested in the Executive by Congress; it was vested in Congress by sovereign people through constitutional ratification. Neither Congress nor the Executive has the authority to repeal or amend the terms of Article I, § 9, cl. 7.

Today, Rosemary Collyer rejected the argument that the statutory obligations to fund 1401 meant that HHS could commingle monies to fund 1402:

“If the statutory language is plain, we must enforce it according to its terms.” King v. Burwell, 135 S. Ct. 2480, 2489 (2015). Although the “meaning—or ambiguity—of certain words or phrases may only become evident when placed in context,” id., the statutory 2 provisions in this case are clear in isolation and in context. The Affordable Care Act unambiguously appropriates money for Section 1401 premium tax credits but not for Section 1402 reimbursements to insurers. Such an appropriation cannot be inferred. None of Secretaries’ extra-textual arguments—whether based on economics, “unintended” results, or legislative history—is persuasive. The Court will enter judgment in favor of the House of Representatives and enjoin the use of unappropriated monies to fund reimbursements due to insurers under Section 1402. The Court will stay its injunction, however, pending appeal by either or both parties. …

The only result of the ACA, however, is that the Section 1402 reimbursements must be funded annually. Far from absurd, that is a perfectly valid means of appropriation. The results predicted by the Secretaries flow not from the ACA, but from Congress’ subsequent refusal to appropriate money. Such an appropriation cannot be inferred, no matter how programmatically aligned the Secretaries may view Sections 1401 and 1402. See 31 U.S.C. § 1301(d) (“A law may be construed to make an appropriation out of the Treasury . . . only if the law specifically states that an appropriation is made”). “This principle is even more important in the case of a permanent appropriation.” Remission to Guam & Virgin Islands of Estimates of Moneys to be Collected, B-114808, 1979 WL 12213, at *3 (Comp. Gen. Aug. 7, 1979).

Paying out Section 1402 reimbursements without an appropriation thus violates the Constitution. Congress authorized reduced cost sharing but did not appropriate monies for it, in the FY 2014 budget or since. Congress is the only source for such an appropriation, and no public money can be spent without one. See U.S. Constitution, Art. I, § 9, cl. 7 (“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . . .”). The Secretaries’ textual and contextual arguments fail.

HHS has been enjoined from paying subsidies to insurers through 1402, although Collyer stayed the order while the Obama administration prepares an inevitable appeal. Without these subsidies, insurers will high-tail it out of the exchanges, a process that’s already under way. And for good reason, as I note in my column today at The Fiscal Times:

As the fourth year of Obamacare approaches, Politico’s Paul Demko reports that consumers can expect more of the same price hikes and narrowed choices as they have seen the first three years. The Obama administration insists that prices only rose eight percent for 2016 over the previous year – even though that itself is still more than three times the rate of inflation, and ignores states like Minnesota where the average premium increase was over 30 percent.

“There are reasons to think the next round may be different,” Demko warns. He quotes a Deloitte executive who agrees. “A number of carriers need double-digit increases” for 2017. Those price increases will hit the Obamacare exchanges on November 1^st, one week before voters elect a new President and Congress.

Kaiser Health News reports that 2017, far from being the year that stabilizes the Obamacare exchanges, will be another “adjustment year” for the risk pools. Even the director of Covered California expects to see higher rate increases in the fourth year of Obamacare than previously seen, although Peter Lee shrugs off the risk for his own exchange. “There are a number of reasons 2017 will have higher rate increases than the last few years,” Lee tells KHN. “But we believe in California we won’t see the significant headwinds many other states are experiencing.” However, Lee would not answer when KHN asked if UnitedHealth Group had applied to participate in Covered California for 2017.

This brings us back to the ability to keep one’s plan. UnitedHealth has made clear its intentions to exit most of the state Obamacare markets next year, and California may well be one of them. A more troubling exit looms on the horizon – the exit of all insurers from the lowest-cost bronze plans.

If this stands, House Republicans may have finally put a stake through the heart of ObamaCare. If so, they’d better start delivering on their promises for a coherent replacement.

Update: The White House remains defiant:

The White House said on Thursday the U.S. Department of Justice was still deciding whether to appeal a court ruling challenging President Barack Obama’s healthcare law, but a spokesman predicted Republicans ultimately would lose the fight.

“This suit represents the first time in our nation’s history that Congress has been permitted to sue the executive branch over a disagreement about how to interpret a statute,” White House spokesman Josh Earnest told a briefing.

Maybe it’s the first time that the executive branch spent discretionary funds that Congress hadn’t appropriated.