Court limits CMS’s authority to immediately apply the ACA marketplace program integrity final rule

A federal judge blocked many of the Trump administration’s plans to constrict enrollment in Affordable Care Act (ACA) marketplace health plans in the name of program integrity.

In an Aug. 22 ruling, Judge Brendan Hurson (a Biden appointee) of the U.S. District Court for Maryland issued a stay of key provisions of a CMS final rule that would affect enrollment processes for 2026.

In the rule implementing program integrity processes for the ACA marketplaces, CMS acknowledged that enrollment for next year would drop by between 725,000 and 1.8 million as a result of the provisions. An undetermined number would be expected to find other coverage. Plaintiffs in the lawsuit said the number losing ACA coverage would be “at least” 1.8 million.

Plaintiffs include the municipalities of Columbus, Ohio, Baltimore and Chicago, along with a small-business association and a physician advocacy group. Their litigation states that the final rule would erode coverage and raise employer costs by obstructing enrollment and making premiums more expensive. Uncompensated care costs for the municipalities would rise because additional numbers of uninsured or underinsured patients likely would seek care at city-run healthcare facilities and via city-operated services such as ambulance transport.

The stay was issued in part because the plaintiffs appear to have a strong likelihood of succeeding in their challenges to several aspects of the rule, Hurson wrote.

Premiums in the spotlight

A key question is whether the court ruling would affect nonsubsidized ACA premium rates, which have been surging in preliminary filings for 2026. ACA insurers have cited the final rule as one driver of the proposed increases.

The rule is “expected to reduce marketplace enrollment and worsen the overall risk pool,” said Louise Norris, health policy analyst with healthinsurance.org. “A lot of the provisions in the marketplace rule add hoops for people to jump through in order to obtain coverage, which healthy people are less likely to do.”

She added, “We could potentially see revised filings due to the lawsuit, but that will depend on the status of the court case as we get closer to the rates being finalized. Since the stay is temporary and the eventual outcome of the court case isn’t yet known, insurers and state insurance departments might opt to keep the rates as filed and rely on the ACA’s medical loss ratio to address potentially excessive premiums after the fact.”  

Affected provisions on enrollment

Unless the Trump administration pursues and wins an appeal of the district court’s decision, several components of the final rule will not take effect as scheduled going into the 2026 enrollment period.

For example, the administration cannot implement the option for marketplace plans to deny coverage to enrollees whose premium payments are past due. Hurson said the provision would contravene the ACA’s guaranteed-issue requirement and that CMS cannot overturn the requirement even in a way that would constitute sensible policy.

The ruling also negates a provision that would require additional documentation from enrollees using Healthcare.gov to find a plan during any 2026 special enrollment period (SEP).

The plaintiffs said that clause would generate 293,000 verification issues for the federally facilitated marketplaces to work through during the next year, leading younger and healthier enrollees to drop coverage. CMS was looking to use the provision to discourage people from using SEPs to sign up for coverage only when they need healthcare services, but the judge said the rule’s language did not conclusively establish a link between SEP enrollment and ACA program integrity concerns.

Affected provisions regarding subsidies

One of the stayed provisions would authorize Healthcare.gov to limit subsidies for individuals who are automatically re-enrolled in fully subsidized coverage and don’t pay a newly required $5 administrative premium.

Another provision negated by the court’s ruling would render enrollees ineligible for subsidies in 2026 if they do not reconcile their advance subsidy amounts with their reported income.

Also halted by the court is a mandate for some subsidy applicants to provide additional documentation regarding their income if their tax data is unavailable. Such requirements would result in a projected loss of coverage for more than 400,000 people, per CMS, making this one of the most significant aspects of the court ruling.

However, the budget reconciliation law known as the One Big Beautiful Bill Act implements a similar provision, effective in 2028.

Stemming from the court’s decision, plans will not have additional flexibility in setting actuarial values, as the final rule provides for. CMS hoped that allowing plans to incorporate lower actuarial values would lead to lower premiums and thereby lure healthier people into the risk pool. But the plaintiffs said payable subsidies would drop by $1.2 billion, based on the formula linking subsidies to the cost of benchmark silver-tier plans, which would become less expensive under the new rule.

Some provisions deemed permissible

CMS is allowed to continue with some aspects of the final rule, among them the inclusion of individual-insurance premiums in the calculation of the premium adjustment percentage for marketplace plans.

Previously, only employer-sponsored premiums have been used in setting the adjustment, which helps determine the annual consumer cost-sharing limit for marketplace plans. Plaintiffs said the methodological change will trigger big increases in annual out-of-pocket limits: $450 for individuals and $900 for families.

Another part of the final rule that can remain is a recission of a Biden administration policy that added 60 days for enrollees to furnish proof of their income in the context of verifying their eligibility for subsidies. The rule nullifies the 60-day extension and limits the window to the statutorily provided 90 days.

 The plaintiffs initially contested the rule’s revocation of the continuous SEP for low-income enrollees but chose not to proceed with that part of their challenge.

Norris noted that termination of ACA marketplace coverage for immigrants with Deferred Action for Childhood Arrivals (DACA) status also can proceed following the court decision. Roughly 10,000 enrollees in the marketplaces and 1,000 in the Basic Health Program are projected to lose 2026 coverage as a result.

Looking ahead

The final rule diverged from CMS’s earlier proposed rule in that several key provisions would sunset after 2026. The reason for the change was the administration’s projection that the enhanced subsidies would expire at the end of 2025, thereby removing some of the perceived enrollment excesses for enrollment periods taking place ahead of 2027 and later years.

It’s not guaranteed, however, that the GOP majorities in Congress will allow the enhanced subsidies to end. If the subsidies are extended, it then remains to be seen whether CMS would seek to maintain some of the provisions beyond 2026 — at least any provisions that the agency has legal standing to enact after the litigation process.

The pending termination of the subsidies would have a bigger projected impact on enrollment than would the final rule, even if the rule were allowed to be implemented in full. According to prior estimates from the Congressional Budget Office, more than 2 million additional people would be uninsured in 2026 if the subsidies expire.