States sue CMS over final rule on ACA enrollment

Attorneys general for 20 states have filed a lawsuit against the Centers for Medicare and Medicaid Services, claiming a recent final rule will make it unnecessarily difficult to get health insurance through the Affordable Care Act marketplaces.

Led by California Attorney General Rob Bonta, Massachusetts Attorney General Andrea Campbell and New Jersey Attorney General Matthew Platkin, the lawsuit claimed CMS’ final rule would make numerous amendments to rules governing federal and state health insurance marketplaces, which the administration estimates will cause up to 1.8 million people to lose their health insurance.

That would cause millions more to pay increased insurance premiums and out-of-pocket costs, such as copays and deductibles, the AGs claim.

The final rule also excludes coverage of gender-affirming care as an essential health benefit under the ACA. In the lawsuit, the attorneys general argue that the rule is “arbitrary and capricious, contrary to law and violates the Administrative Procedure Act (APA).”

The coalition is also seeking preliminary relief, and a stay, to prevent the challenged portions of the final rule from taking effect in the plaintiff states before the August 25 effective date.

“Far from delivering on their promises to drive down costs and ‘make America healthier,’ the Trump Administration’s HHS and CMS are doing their best to make it harder and more expensive for Americans to obtain health insurance and access care,” said Bonta. “These sweeping changes would impose onerous verification requirements, junk health insurance premiums for some consumers, shorten enrollment periods in federal and state healthcare exchanges like Covered California, deprive up to 1.8 million Americans of health insurance, drive up out-of-pocket healthcare costs and so much more. It’s unlawful and it’s wrong.”

WHAT’S THE IMPACT

The state AGs participating in the lawsuit, all Democrats, pointed to rising enrollment in the ACA marketplace, with annual enrollment doubling over the past five years – which, they said, resulted in more than 24 million people signing up for health insurance coverage in plan year 2025 on the ACA exchanges and receiving subsidies to make that coverage more affordable.

CMS’ final rule, the lawsuit contends, would effectively reverse that trend and result in roughly 1.8 million people losing coverage. This, in turn, would drive up the costs incurred by the plaintiff states in providing healthcare, including increasing state expenditures on Medicaid, uncompensated emergency care and funding other services provided to newly uninsured residents, according to the lawsuit.

The suit also claims the final rule would make substantial changes to the operation of the ACA marketplaces, including imposing an automatic monthly charge on all automatically re-enrolled consumers who qualify for $0 premiums, shortening the open enrollment period for signing up for health coverage and adding other "bureaucratic barriers.”

By excluding gender-affirming care as an essential health benefit on federal exchange plans, state AGs said states would be responsible for paying for the portion of insurance premiums attributable to any such coverage, although in California the availability of such care would not be affected.

THE LARGER TREND

The final rule, issued in June, was intended to crack down on what it called “improper enrollment” in ACA plans.

CMS said the rule was projected to save taxpayers up to $12 billion in 2026 by combating improper enrollments, reining in federal spending and by making health insurance markets more affordable. It cited research suggesting that in 2024 an estimated 5 million people may have been improperly enrolled, costing taxpayers as much as $20 billion.

The rule also lowers individual health insurance premiums by an estimated 5%, CMS said.