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Dive Brief:

  • More than 20 states are suing the Trump administration over a regulation that shortens sign-up periods and increases eligibility verification requirements for Affordable Care Act marketplace plans. 
  • The lawsuit, filed Thursday in Massachusetts district court, argues the rule would cull up to 1.8 million people from ACA plans and drive up healthcare costs for states in the form of higher uncompensated care and Medicaid expenses.
  • In response, an HHS spokesperson said the regulation, which was finalized last month, safeguards the exchanges by increasing oversight and ensuring subsidies are provided only to eligible enrollees. 

Dive Insight: 

The final rule makes several changes to exchange enrollment and eligibility. For example, it shortens the annual open enrollment period by one month, and ends a special sign-up period for lower-income beneficiaries. 

It also lessens the amount of time before financial assistance is revoked for people who fail to reconcile their tax information with their eligibility for subsidies. Enrollees also won’t automatically receive an extension to verify their income if they face challenges during the sign-up process. 

The new lawsuit, brought by 20 Democrat state attorneys general and Pennsylvania Gov. Josh Shapiro, alleges the regulation will reverse growth in ACA marketplace enrollment. Sign-ups for ACA plans broke records again this year, with more than 24 million beneficiaries enrolling into the coverage. 

Additionally, if the rule goes into effect, states will incur “unrecoverable compliance costs” from updating technology systems, retraining staff, and initiating advertising and outreach to beneficiaries, the lawsuit argues.

States will also lose tax revenue derived from insurance premiums, and face increased expenses for providing healthcare to residents who will become uninsured following the rule’s implementation, according to the suit. 

The regulation also bans coverage of any “sex-trait modification procedure,” which plaintiffs said diverges from longstanding HHS policy that prioritized states’ flexibility in how they manage the exchanges.

“The Trump Administration’s unlawful and baseless rule not only threatens to rip away coverage from millions of Americans but leaves states on the hook once again to foot the bill for this Administration’s cruel and disastrous policies,” Massachusetts Attorney General Andrea Joy Campbell said in a Thursday statement. 

The states allege the rule violates the Administrative Procedure Act, which governs how federal agencies develop and issue regulations. For example, regulators only allowed 23 days for public comment on the proposed rule before it was finalized, even though they received objections asking for 30 or 60 days, according to the suit. 

The HHS argues that the rule combats fraud on the ACA marketplaces, including preventing people from being enrolled in coverage without their consent. 

“Contrary to the claims asserted by liberal mayors and various organizations, this rule will lower individual health insurance premiums by approximately 5% on average providing real relief for American families who rely on the Marketplace,” an HHS spokesperson said Friday. “It strengthens, not weakens, access by making the system more stable, fair, and sustainable.”