Mayors, liberal groups sue to stop CMS rule cracking down on Obamacare

A coalition of Democratic mayors, liberal advocates and physicians are suing the Trump administration over new rules designed to “undermine” the Affordable Care Act.

A Maryland judge announced a hasty briefing schedule Wednesday to hear the case in advance of the new rules’ Aug. 25 effective date.

The Centers for Medicare & Medicaid Services rolled out the changes last month, which include a shortened enrollment period, more stringent income verification checks, and a $5 fee for some people who automatically re-enroll in a free plan.

Insurers will also be able to deny coverage to people who have not paid their premiums on past plans. The rules also bar roughly 100,000 immigrants who were brought to the United States as children from signing up for the coverage.

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

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

“Paying more for less is always a bad deal, but that’s exactly what the president is proposing for health care coverage—a bad deal for working people, families, and cities that rely on the Affordable Care Act to decrease costs and increase accessibility,” said Columbus City Attorney Zach Klein.

The CMS did not respond to a message seeking comment on the lawsuit. In finalizing the rule, CMS officials said it will 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.

Liberal groups allege APA violations

Filed in U.S. District Court for the District of Maryland, the lawsuit alleges violations of the Administrative Procedure Act. That is an important distinction as the plaintiffs seek a nationwide injunction preventing the rule from taking effect.

In a June ruling, the Supreme Court declared that lower-court universal injunctions "likely exceed the equitable authority that Congress has granted to federal courts." However, that decision left an exception in place for APA challenges.

The CMS rule limits ACA enrollment to Nov. 1 to Dec. 15 in 2026, a reversal of the Biden administration’s approach. The previous administration expanded the enrollment window, which led to record enrollment of more than 24 million.

Plaintiffs say that the new policies were introduced without an adequate public comment period on the proposals.

CMS published a proposed version of the rule on March 19, 2025, and received more than 26,000 comments, despite a shortened 23-day (rather than 30-day) formal comment period, the lawsuit said.

“This unlawful rule will force families off their health insurance and raise costs on millions of Americans. This does nothing to help people – and instead harms Americans’ health and safety across our country,” said Skye Perryman, president and CEO of Democracy Forward. “Americans deserve a government that protects their health, not one that puts it at risk.”

Accelerated timeline

Judge Brendan Abell Hurson ordered CMS and related co-defendants to respond to the motion for an injunction by July 16 and plaintiffs to reply by July 30.

The Trump administration claims that the ACA marketplace is riddled with fraud due to expanded subsidies, or tax credits that keep Americans’ monthly premiums low. Millions of Americans are enrolling in those low-cost plans even if their income makes them ineligible for heavily subsidized plans, according to conservative think tank Paragon Health Institute.

Congress expanded those subsidies in 2021 during the COVID-19 pandemic, but the temporary tax credits are set to expire at the end of 2025.

Plaintiffs counter by pointing out that the rule raises the cost of coverage by manipulating formulas that will raise premiums and out-of-pocket costs for millions, while reducing benefits. It adds up to people paying more for less, the liberal groups say, and allows insurers to refuse to enroll people over old debts as low as $10, without notice.

“This rushed ACA Marketplace rule claims to fix enrollment abuses, but instead of cracking down on predatory brokers, it punishes families,” said Dr. Janet Krommes, Doctors for America.

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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 [email protected]. Follow him on Twitter @INNJohnH.