Court decisions on ACA marketplace rules affect key coverage provisions

As CMS moves ahead with Medicaid funding limits for gender-affirming care in minors, Democratic state leaders used litigation to block restrictions in the Affordable Care Act (ACA) insurance marketplaces.

The ACA policy, established in 2025 regulations, would remove the essential health benefit (EHB) designation from gender-affirming care. EHB status allows ACA consumer protections, such as annual out-of-pocket limits and prohibitions on lifetime and annual dollar caps, to apply to the service.

The Aug, 14 ruling by the U.S. District Court for Massachusetts states that HHS and CMS did not follow proper procedure when implementing the EHB change in the ACA Marketplace Integrity and Affordability final rule, issued in 2025. Specifically, the agencies did not fulfill an ACA mandate to submit a report to Congress certifying that the revised benefit remains equivalent in scope to benefits provided by a typical employer.

“HHS has acted in contravention of the ACA by revising the EHBs without abiding by the relevant statutory requirement,” wrote Judge Nathaniel Gorton (a George H.W. Bush appointee).

ACA coverage of gender-affirming care still can vary depending on state benchmarks and plan rules. But barring a successful appeal or a revamped set of regulations, HHS is not authorized to categorically strip gender-affirming services of EHB status.

The decision stops the Trump administration’s attempt to make the services “more expensive and less accessible,” Andrea Joy Campbell, attorney general for Massachusetts, said in a news release. Massachusetts is among the 21 plaintiff states in the case.

Other ACA marketplace provisions remain tied up in court

Other parts of the decision in the Massachusetts case, State of California v. Kennedy, were more favorable to HHS and CMS. However, a June 2026 ruling by a Maryland federal court previously vacated those same provisions, meaning the practical impact of the Massachusetts ruling is limited to potentially strengthening the agencies’ case in a pending appeal.

Components of the 2025 rule that were supported in the Massachusetts decision but nonetheless are vacated due to the Maryland ruling include limits on the annual window for open enrollment, which would be restricted to Nov. 1-Dec. 31 each year.

Another such provision involves the allowable variation in actuarial values of ACA plans in each metal tier (bronze, silver, etc.). HHS sought to expand the permissible range to give insurers more flexibility in plan design, saying the change could improve the ACA risk pool by lowering baseline premiums and thereby attracting healthier consumers who don’t qualify for subsidies.

Gorton, the Massachusetts judge, backed HHS’s reasoning. But Judge Brendan Hurson (a Biden appointee), the judge in the Maryland case, had vacated the provision, saying CMS failed to make a “rational connection between the facts found and the choice made.”

OBBBA set to override vacatur of ‘file and reconcile’ provision

The Massachusetts judge also upheld a change that would render enrollees ineligible for ACA subsidies following any year in which they fail to file a tax return and reconcile their subsidy amount with their income.

That decision will not make a material difference for 2026 or 2027, given that the provision was vacated in the Maryland case. The vacatur restores previous regulations that kept enrollees eligible for subsidies unless they failed to file and reconcile over a two-year period.

However, the vacatur is only temporary because the One Big Beautiful Bill Act (OBBBA) incorporates the tightened requirement starting in 2028. Other provisions in the same section of the OBBBA are expected to curtail auto-reenrollment in ACA plans by requiring verification of household income and other personal information before an enrollee is eligible for subsidized marketplace coverage.

HHS gets green light to revise a key premium-related metric

A provision of the 2025 rule that was upheld in both the Maryland and Massachusetts rulings allows the federal agencies to revise the methodology for calculating the premium adjustment percentage (PAP).

The percentage is used to determine maximum cost-sharing limits and the parameters for the subsidies that eligible enrollees can use to buy marketplace plans. As stipulated in the 2025 rule, CMS plans to add individual-insurance market premiums to the PAP formula. Under prior regulations, the calculation was strictly based on employer-sponsored plan premiums.

Plaintiff states in the Massachusetts case argued that the new approach could affect ACA premiums by reducing available subsidy amounts, and that HHS had not provided adequate justification for making the change. An analysis by the Center on Budget and Policy Priorities projected that the regulatory changes to the PAP would result in a 2.7% increase in ACA net premiums if implemented for 2026.

Gorton ruled that the provision was on solid ground, in part because the change better reflects the statutory guideline for calculating average health insurance premiums.

Various 2025 and 2027 ACA regulatory changes on hold

Other issues included in the vacatur by the Maryland court, stemming from the first case about the 2025 rule, were not addressed in the Massachusetts case.

Those include tighter eligibility and documentation verification requirements for special enrollment periods (SEPs), stricter processes for verifying an enrollee’s income level, a requirement for a minimum $5 initial premium payment by auto re-enrollees, rules regarding how past-due premiums affect coverage eligibility, and reduction of a 60-day window for consumers to resolve reported income discrepancies.

In addition, in a separate proceeding, the Maryland court granted plaintiffs a preliminary injunction of parts of CMS’s final rule for 2027 marketplace enrollment. Among the stayed elements are the file-and-reconcile provision that nonetheless looms for 2028, as codified in the OBBBA.

Other 2027 provisions affected by the preliminary injunction include an increase in out-of-pocket limits for bronze plans and expanded eligibility for catastrophic plans, along with the administration’s second attempt to strengthen verification requirements relating to income and SEP eligibility.

The court also stayed 2027 provisions changing enforcement of network adequacy requirements and essential community provider standards in the ACA marketplaces, and loosening requirements for insurers to offer standardized plans.

According to an analysis in Health Affairs, the injunction on the regulatory changes to network adequacy requirements and standardized plans could complicate implementation of a noteworthy 2027 change that would allow enrollees to select non-network plans.

The question of EHB status for gender-affirming healthcare services was not raised in the Maryland case, leaving the Massachusetts ruling as the decisive word on the matter to date.