A new lawsuit brought by 20 Democratic attorneys general says a recent final rule by the Centers for Medicare & Medicaid Services (CMS) will make it unfairly difficult to obtain health insurance through the Affordable Care Act (ACA).
The lawsuit mirrors a challenge by three cities and liberal advocacy groups earlier this month. Plaintiffs in both cases say the regulation will cause up to 1.8 million people to lose coverage, starting in 2026. Many more will see premiums increase and out-of-pocket costs soar.
Thursday’s suit also takes issue with a provision in the rule, finalized in June, barring federal funds toward gender-affirming care services as an essential health benefit under the ACA.
The states hope to delay the rule from taking effect in August.
“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,” said California Attorney General Rob Bonta in a statement.
Only two states have more ACA enrollees than California, a news release said. Two million people accessing healthcare coverage in this avenue will face higher costs and new barriers to care. The attorneys general of New Jersey and Massachusetts are co-leading the suit with Bonta, according to statements.
Also Thursday, the CMS released new figures supporting the administration’s stance there have been a surge of improper enrollments draining federal health programs. Conservative think tank Paragon Health Institute has previously estimated 5 million people enrolled improperly in ACA plans in 2024.
Software engineers working with the CMS, analyzing 2024 enrollment data, found 1.2 million people enrolled in Medicaid or the Children’s Health Insurance Program (CHIP) in multiple states, and 1.6 million enrolled in one of those programs and an ACA exchange plan.
“The Biden Administration struggled to ensure that individuals were only enrolled in the single Medicaid or Exchange plan for which they were eligible, that ends today,” said CMS Administrator Mehmet Oz., M.D., in a separate news release. “CMS is restarting these important checks to follow federal law.”
Both Oz and Department of Health and Human Services Secretary Robert F. Kennedy Jr. in statements said this task will be easier due to the passage of Trump’s reconciliation bill. Broadly speaking, the bill makes it more difficult for individuals to enroll, and stay enrolled, in coverage.
The CMS said ACA exchanges are required to scrutinize data for dual enrollments through Medicaid Periodic Data Matching twice a year, but this standard was paused during the COVID-19 public health emergency. The agency warned states earlier today that Medicaid waivers applications with generous continuous eligibility provisions would not be accepted going forward.
The CMS laid out three ways it will work with states to minimize duplicate enrollment.
First, the CMS will give states a list of people enrolled in Medicaid or CHIP in at least two states and tell them to recheck eligibility.
They also informed individuals enrolled in Medicaid or CHIP and a federal exchange plan, instructing them to disenroll from Medicaid or CHIP, end their exchange subsidy or clarify and verify their correct status. Otherwise, the subsidy will expire in 30 days.
Lastly, CMS will notify states of people in a Medicaid or CHIP plan and a state-based exchange plan. States then must then start a process to recheck eligibility.
States are expected to receive more guidance by August.