Opposition to Proposed Federal Payment Rule Impacting ACA Exchanges

A coalition led by New Jersey's Attorney General, Jennifer Davenport, is advocating against a proposed federal payment rule that could impact the Affordable Care Act (ACA) marketplace exchanges. Joined by attorneys general from California, Massachusetts, and 16 other states, the coalition is urging federal authorities to retract this rule introduced by the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) on February 11, 2026. The rule threatens to increase health coverage costs, potentially resulting in up to two million Americans losing their insurance.

The proposal includes significant increases to maximum out-of-pocket expenses, setting a new limit of $31,200 for family plans under catastrophic coverage. Such changes stray from the ACA's mission to expand coverage and reduce costs. If implemented, the rule could lead to higher premiums, imposing operational challenges on state-managed exchanges like New Jersey's GetCoveredNJ.

Attorney General Davenport has raised concerns that the rule imposes undue financial and administrative burdens on states, deeming it an inefficient use of governmental resources. This stance is reinforced by the fact that certain provisions had previously faced court challenges. Experts in insurance further warn that expanding the use of catastrophic plans, which generally exclude certain essential health benefits, might raise medical out-of-pocket expenses for consumers.

The proposed regulations introduce multi-year catastrophic plans and allow different out-of-pocket limits based on specific health conditions, potentially violating ACA regulations against discrimination due to pre-existing conditions. Such adjustments risk destabilizing health insurance markets, potentially leading to a "death spiral," characterized by rising premiums and consumer confusion.

The coalition's comment letter highlights the potential challenges and legal implications the proposed changes could introduce. It argues that the rule lacks rational justification and warns of its legally questionable nature if enacted. This unified warning from attorneys general across New Jersey, California, Massachusetts, and 17 other states underscores a broad interstate concern regarding the rule's impact on the ACA’s effectiveness.