Dive Brief:
- A federal judge has temporarily halted provisions of a rule from the Trump administration meant to reshape the Affordable Care Act exchanges days before they were scheduled to go into effect.
- On Thursday, a Maryland district court determined the coalition of cities and provider groups that filed a lawsuit challenging the rule would suffer “irreparable harm” from the policies, including the expansion of bare-bones catastrophic coverage and stricter verification of enrollees’ eligibility for subsidies.
- The stay is a victory for insurers, given it staves off further disruption to the already destabilized ACA marketplaces. However, the relief may be short-lived, as some of the policies codified in the GOP’s “Big Beautiful Bill” will be enacted in 2028.
Dive Insight:
The cities of Baltimore, Chicago and Columbus, Ohio; the county of Pima County, Arizona; and advocacy groups Doctors for America and Main Street Alliance filed the lawsuit last month arguing that federal regulators violated the Administrative Procedure Act and the Affordable Care Act in the rule from the CMS, which was finalized this spring despite opposition from a broad swath of the healthcare industry.
The complaint argues that the regulation will make it harder for Americans to access and pay for ACA coverage, and lower the quality of plans in the exchanges. Up to 2 million people are expected to lose their insurance as a result of the rule, according to CMS projections, which the plaintiffs argue would saddle them and their members with higher premiums and more drastic uncompensated care costs.
Judge Brendan Hurson agreed, ruling Thursday that the plantiffs appear likely to succeed on the merits of their arguments that the CMS overstepped its rulemaking authority.
Hurson has paused eight provisions of the rule while the case moves forward, including a policy that would disquality those who fail to reconcile tax credits with their income from receiving subsidies, and two policies imposing higher income verification standards if exchanges find inconsistencies in tax data or when that data isn’t available.
The judge also stayed the creation of stricter eligibility checks ahead of a special enrollment period; the increase of maximum out-of-pocket payments for bronze plans; the elimination of standardized plan requirements; the relaxation of network adequacy standards; and the expansion of eligibility for catastrophic coverage, plans designed as coverage of last resort that can leave members vulnerable to very high costs.
The changes were set to kick in on July 20.
The nonprofit Democray Forward, which filed the lawsuit on the cities’ behalf, cheered Hurson’s decision, calling it a victory for ACA enrollees.
“We are pleased that the court has stopped the president’s disastrous and harmful attempt to take healthcare away from working families, and remain committed to defending our democracy from these kinds of unlawful attempts to harm Americans,” Skye Perryman, Democracy Forward’s president and CEO, said in a statement.
It’s the latest court decision finding fault with Trump administration’s efforts to remake the ACA exchanges. Health officials argue that heightened enrollment and eligibility standards are needed to crack down on fraud in the marketplaces set up by the Obama-era law, though some patient advocates and health policy researchers view the efforts as a smokescreen for chipping away at the ACA.
The same judge also stayed some identical provisions in another ACA exchange rule last summer before officially vacating them last month.
The rulings are a boon for insurers with an outsized presence on the exchanges, including Centene and Molina, which are already absorbing significant turbulence in their ACA books from the expiration of more generous subsidies for coverage at the end of last year.
Further membership losses from the Trump administration’s policies wouldn’t have helped, according to analysts. Still, it’s not a permanent reprieve, given 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.
The CMS could also appeal Hurson’s decision, a move that J.P. Morgan analyst John Stansel said was likely.
“We expect that HHS/CMS will appeal the stay and look for this rule to be re-implemented,” Stansel wrote in a Thursday note.
The CMS did not respond to a request for comment.
