Dive Brief:
- A federal judge has struck down key provisions in a CMS rule overhauling the Affordable Care Act, in a setback for the Trump administration’s push to combat fraud that critics argue is a smokescreen for weakening the exchanges set up by the Obama-era law.
- On Friday, Judge Brendan Hurson of the Maryland District Court vacated eight of the rule’s most consequential provisions, including the creation of a $5 premium penalty for individuals who automatically reenroll in coverage and a policy disqualifying people who fail to reconcile tax credits with their income from receiving subsidies.
- The decision is not a surprise after Hurson stayed most of the provisions last year. Still, officially tossing them out is a victory for proponents of expanded ACA coverage — though a short-term one, given many of the changes were codified in the GOP’s “Big Beautiful Bill” passed last summer.
Dive Insight:
The CMS rule finalized last June shrunk sign-up windows and heightened eligibility verification for ACA plans, part of regulators’ larger push to crack down what they argue is widespread fraud and abuse in the exchanges.
Officials in the Trump administration have pointed to research from a prominent conservative think tank showing that millions of ACA enrollments are improper, driving up government subsidies for ACA plans. Independent health policy experts say that estimate is likely inflated, though many agree that improper sign-ups are an issue in the exchanges.
Still, the rule was viewed by academics and patient advocates as a scorched earth approach to addressing the problem. Up to 1.8 million people were expected to lose coverage as a result of the policies.
Nonprofit Democracy Forward quickly filed a lawsuit challenging the rule on behalf of the cities of Chicago, Baltimore and Columbus, Ohio, along with the physician advocacy organization Doctors For America and small business lobbying group Main Street Alliance.
The suit argued that the Trump administration violated the Administrative Procedures Act in issuing the rule, and that the plaintiffs would shoulder higher costs and see their members lose coverage if it went into effect.
Hurson stayed key provisions of the rule later that summer, determining that the plaintiffs were likely to succeed. The Trump administration appealed the stay, which remains pending. But now, Hurson has officially tossed out the lion’s share of the controversial rule, agreeing that regulators overstepped in tinkering with the enrollment and eligibility setup laid out in the ACA.
“The agency cannot utilize its general rulemaking authority to override explicit statutory provisions,” the judge wrote in his Friday opinion.
Along with vacating the $5 automatic re-enrollment penalty and the “failure to reconcile” policy, Hurson vacated the elimination of guaranteed coverage for people who are overdue to pay their premiums; the imposition of higher income verification standards if exchanges find inconsistencies in tax data; a policy requiring stricter eligibility checks ahead of a special enrollment period; and changes to a formula used to sort ACA plans into different coverage tiers.
All of those provisions had previously been stayed. However, Hurson also vacated a policy he had originally allowed to continue: the elimination of a 60-day window for ACA enrollees to resolve inconsistencies in their income data.
Hurson also vacated the creation of a shorter open enrollment period beginning next year, a change the judge didn’t explicitly address last August.
Hurson did allow changes to the CMS’ methodology for calculating premium adjustment — the only major policy in the rule the judge allowed to continue, noting that the CMS had properly justified the reason for the change.
“While this policy change will undoubtedly have effects on the broader insurance market, including, as HHS concedes, an increase in premiums and a worsening risk pool, the Court is constrained to conclude that HHS did not act without explanation or rationale in making this decision,” Hurson wrote.
Democracy Forward called the ruling a “major victory” in a statement Friday. Other plaintiffs also cheered the result.
“This ruling is a significant win for millions of Americans, including thousands in Ohio, who would have been denied coverage or seen their out-of-pocket costs skyrocket due to this president and his administration,” Zach Klein, the attorney for the city of Columbus, said.
Still, the ruling is not a panacea for advocates of the ACA. The CMS could appeal Hurson’s decision. Regulators have promulgated other rules that critics say weaken patient protections. And the GOP’s tax and policy megabill signed into law last summer codified similar policies restricting the ACA, including effectively ending autorenewals and requiring enrollees to update income information more frequently or risk losing coverage. Those changes are set to go into effect in 2028.
Meanwhile, the ACA exchanges have already shrunk after the Republican-led Congress allowed more generous subsidies for coverage to expire at the end of 2025. ACA enrollment could fall by 17% to 26% this year as a result, leaving millions more Americans uninsured, according to Wakely Consulting Group.
Meanwhile, the health status of the ACA population seems to be degrading, throwing the long-term stability of the exchanges into doubt.
Younger and healthier individuals appear to be exiting the exchanges at a higher rate, leaving those who are remaining sicker and more expensive for insurers to cover. That could create a vicious cycle, where some insurers drop out and others continue to hike premiums, leading more healthy individuals to eschew coverage until the marketplaces are whittled down to nothing and forced to close.
Carriers have already started bowing out of the exchanges, citing sky-high spending and regulatory turbulence. Those include major national insurers like CVS and Cigna along with smaller regional plans like Providence Health Plan, PacificSource and Baylor Scott & White.
