District Court Vacates Key Portions of ACA Marketplace “Integrity” Rule

July 2026

Stephanie Hall, Associate Director Benefits Compliance

The U.S. District Court for the District of Maryland recently invalidated key aspects of a final rule issued by the U.S. Department of Health and Human Services (“HHS”) last June. The Marketplace Integrity and Affordability Rule imposed stricter eligibility and enrollment standards for the Affordable Care Act’s (“ACA”) marketplaces (or exchanges). This recent decision means that the rule’s stricter standards will not take effect; however, a more recent final rule is attempting to readdress similar provisions.

Overview

On June 25, 2025, HHS issued a final rule intended to reduce what it described as “waste, fraud and abuse” by strengthening the integrity of the exchange eligibility and enrollment systems. Many of the rule’s new standards were scheduled to take effect on August 25, 2025.

However, after the rule was issued, three U.S. cities, a coalition of doctors, and an interest group representing small business owners sued HHS. They alleged that the final rule violated the Administrative Procedure Act (“APA”) and created barriers to affordable health coverage (and, in turn, that the plaintiffs would shoulder increased costs). On August 22, 2025, the U.S. District Court for the District of Maryland stayed several key provisions while the litigation continued.

On June 12, 2026, the court invalidated the following provisions after finding that HHS lacked authority under the APA to adopt these changes:

• Requiring those reenrolling in fully subsidized exchange coverage to pay a $5 monthly premium (referred to as a “junk fee” by the plaintiffs) until they confirm their eligibility information.
• Permitting health insurance issuers to require payment of past-due premiums before effectuating new coverage.
• Reinstating a failure to file and reconcile policy that makes individuals ineligible for the advance premium tax credit (“APTC”) if they failed to file a federal income tax return and reconcile the prior year’s APTC (which had been at two consecutive years).
• Expanding pre-enrollment eligibility verification for special enrollment periods (“SEP”).
• Shortening the annual open enrollment period to begin no later than November 1 and end no later than December 31 each year (current open enrollment ends on January 15); and
• Imposing stricter verification requirements for applicants’ household income.

Note that the court upheld the final rule’s revisions to the premium adjustment methodology, which is used to establish several ACA parameters, including the maximum annual limit on cost sharing. This revision will likely increase the maximum annual limitation on cost sharing and net premiums for enrollees with incomes under 400% of the federal poverty level (“FPL”) which could, in turn, negatively impact the cost of exchange coverage and enrollment.

While the 2025 Marketplace Integrity and Affordability Rule may have taken a huge blow for now, HHS, through the Centers for Medicare & Medicaid Services (“CMS”), recently issued final rule, “HHS Notice of Benefit and Payment Parameters for 2027; Basic Health Program” (effective July 20, 2026), with the stated purposes to reduce federal exchange user fees to help lower premiums, establish new safeguards to prevent improper enrollments, ensure subsidies go only to eligible individuals, increase consumer choice, affordability, access and protections, and expand state flexibility to manage exchange operations.  This final rule specifically discusses provisions that, at the time of its issuance, had been stayed by the court in the decision discussed above, and includes “newly finalized” policies for pre-enrollment SEP verification, income verification when data sources indicate income less than 100% of the FPL, and income verification when tax data is unavailable.  Not surprisingly, a lawsuit has already been filed challenging the latest final rule. In fact, the plaintiffs in this case are the same as those who challenged the 2025 final rule discussed above. On July 16, 2026, the court entered an order staying several key provisions of the latest final rule pending a final ruling on the merits of the case. It remains to be seen whether HHS can provide a satisfactory explanation for its latest actions and whether the final rule can survive the claims made by the plaintiffs legal challenges.

The Maryland court dealt a major setback to HHS’s 2025 Marketplace Integrity and Affordability Rule, striking down key exchange eligibility and enrollment restrictions while leaving the premium adjustment methodology intact. HHS is now trying again through the 2027 rule—but with a new lawsuit already pending, the future of these marketplace integrity measures remains unsettled.

Employer action items

• Be aware of changes in eligibility and enrollment requirements in the ACA’s marketplaces, especially for applicable large employers (“ALEs”) that do not offer minimum essential coverage that meets minimum value standards and that is affordable since ALEs are subject to penalties under the ACA’s employer shared responsibility provisions with respect to full-time employees who obtain subsidized coverage.
• All employers sponsoring a group health plan, regardless of size, may also be affected by future changes in the ACA’s marketplaces, specifically with respect to enrollment, premiums, and cost changes.

Additional information and resources

• 2025 Final Rule: Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability 
• City of Columbus, et al. v. Robert F. Kennedy, Jr., et al, No. 1:25-cv-02114 (D. Md.) 
• HHS Notice of Benefit and Payment Parameters for 2027 Final Rule – Fact Sheet 
• 2027 Final Rule