HHS appeals ruling that stalls major Obamacare marketplace changes

The Trump administration is appealing a ruling last month that blocked several parts of its recent changes to the Affordable Care Act exchange enrollment and eligibility.

In addition, defendants, which include the Department of Health and Human Services, HHS Secretary Robert F. Kennedy Jr., Centers for Medicare & Medicaid Services, and CMS Administrator Mehmet Oz, also asked the Maryland federal court for a stay of its Aug. 21 ruling until the appeal is heard.

“While the Court’s Stay Order will undoubtedly hamstring … [HHS] efforts to address legitimate concerns about improper enrollments in Exchange plans that are subsidized by taxpayers, the Court’s preliminary stay of the Rule’s actuarial value policy will be especially harmful to the government and to the millions of consumers who obtain health care coverage through Exchanges,” government attorneys wrote in the appeal filed Friday.

In a lawsuit filed July 1, plaintiffs – a coalition of Democratic mayors, liberal advocates and physicians – challenged nine provisions of the CMS “Marketplace Integrity and Affordability” rule. CMS rolled out the rule in June, claiming that it would lower individual health insurance premiums by about 5% on average.

It is also projected to save taxpayers up to $12 billion in 2026 by “combating the surge of improper enrollments in the [ACA],” the CMS said in a news release. The rule includes a shortened enrollment period, more stringent income verification checks, and a $5 fee for some people who automatically re-enroll in a free plan.

Plaintiffs responded late Tuesday, urging the court to reject the stay request. The portion of the rule that CMS wants to maintain would permit insurers "to market cheaper but less comprehensive plans, thereby eroding the value of coverage," the response reads.

Defendants do not identify any irreparable harm, plaintiffs said.

"They only speculate that some insurers might face challenges in revising their plan offerings, but even their declarant acknowledges that the agency will be able to implement this Court’s ruling in time for the upcoming open enrollment period."

APA violations alleged

Filed in the U.S. District Court for the District of Maryland, the lawsuit alleges violations of the Administrative Procedure Act.

The rule would result in more than 2.2 million Americans losing their health coverage, claimed Democracy Forward, the liberal advocacy group leading the litigation.

In his ruling, Judge Brendan A. Hurson found that plaintiffs “met their burden of showing that there is a strong likelihood that they will succeed on the merits of their challenges to seven provisions” of the rule.

Plaintiffs did not meet the burden of proof on two remaining provisions of the rule, the judge added.

One of the rules stayed by Hurson “adjusts the allowable ranges of actuarial values applicable to the different health care plan types offered on Exchanges under the” ACA, the government appeal explained.

HHS estimated that roughly 80% of issuers participating in federally facilitated exchanges took advantage of that policy by designing health plans that fall within the expanded “de minimis” ranges of allowable actuarial values, the appeal said.

“Yet as a result of the Court’s Stay Order, all of those issuers will now need to revise those plans to comport with the narrower ‘de minimis’ ranges that applied under the pre-Rule regulatory scheme,” the appeal added.

HHS and state agencies will then need to review and approve those revised plans before 2026 open enrollment begins on Nov. 1, the appeal said.

“And if issuers are unable to comply with this abrupt regulatory change, or if their plans are not approved in time, Exchange customers will have fewer plan options to choose from,” government attorneys wrote. “Such a sudden and severe disruption to the Exchange marketplace could have a devastating effect” on availability.

Most-contested provisions

Hurson temporarily blocked most of the contested provisions of the rule, including:

• A $5 fee for low-income individuals auto-enrolled into ACA plans who fail to verify their eligibility.
• Stricter eligibility verification requirements which could make it harder for people to qualify for coverage.
• A provision allowing insurers to deny re-enrollment to individuals with unpaid premiums.
• Exclusion of gender-affirming care from essential health benefits.

Elements left untouched by Hurson's ruling include: modifying how cost-sharing limits are calculated or changes affecting the 60-day reconciliation extension window.

Plaintiffs include the mayors of Baltimore, Chicago and Columbus, Ohio and a pair of liberal groups: Doctors for America and Main Street Alliance.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.