Affordable Care Act application on site.

A settlement between the Trump administration, House Republicans and a coalition of Democratic state attorneys general over the legality of insurer subsidies under the Affordable Care Act has hit a potential snag.

The U.S. Court of Appeals for the D.C. Circuit declined to grant the parties’ joint motion to dismiss the case, jeopardizing the agreement they reached in the litigation late last year.

The proposed settlement sought to vacate a ruling by U.S. District Judge Rosemary Collyer of the District of Columbia that the Obama administration, in the absence of congressional appropriation, unlawfully paid cost-sharing reduction payments. So-called CSRs were designed to offset the cost of discounts that insurers were required to give eligible lower-income Americans under the ACA.

In an earlier ruling in the case, Collyer also found that the House had standing to sue over the billions of dollars in payments. With regard to that ruling, the proposed settlement stated that the parties agree that the ruling remains, but does not “control” decisions in future litigation over this issue.

Because the parties’ proposed agreement sought to undo just one of Collyer’s rulings, a three-judge panel of the D.C. federal appellate court suggested that doing so may not be permissible and asked for further briefing on the matter.

“While not otherwise limited, the parties are directed to explain [in their supplemental briefs] what ‘exceptional circumstances’ justify partial vacatur,” according to the order.

In October, President Donald Trump said that he would end the subsidy payments, which paved the way to the settlement. It also prompted the attorneys general in 17 generally Democratic-led states and D.C., including California and New York, to bring a lawsuit in federal court forcing federal regulators to continue making the payments.

The case, California v. Trump, is pending in San Francisco, with a hearing scheduled for later this month.