Attorney General James Sues to Block Federal Rule Slashing Access to Affordable Health Care Coverage

NEW YORK – New York Attorney General Letitia James and 20 other states today filed a lawsuit challenging a new federal regulation that threatens to strip health care coverage from millions of Americans, drive up health care costs, and unlawfully remove gender-affirming care from the Affordable Care Act’s (ACA) essential health benefits. Attorney General James and the coalition argue that the new rule from the U.S. Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) violates federal law, ignores expert warnings, and places unjustified burdens on states and their residents. Attorney General James and the coalition are asking the court to block the rule, which they argue would devastate state health systems and endanger public health.

“This new rule is an illegal and dangerous attack on health care access,” said Attorney General James. “It strips working families of their health care coverage, imposes unnecessary red tape, and deliberately targets low-income and transgender Americans. In New York, we have expanded coverage, improved affordability, and protected New Yorkers’ health. The federal government should take every opportunity to learn from that success, not actively work to reverse it.”

Congress enacted the Patient Protection and Affordable Care Act (ACA) in 2010 to increase access to health insurance and lower costs for individuals and families. It created state-level health insurance marketplaces where people can compare and purchase affordable plans, and it required that all plans cover a core set of “essential health benefits.” States are also allowed to require coverage of additional benefits beyond the federal minimum. Over the past five years, ACA annual enrollment has doubled, with more than 24 million Americans signing up for coverage this year alone, many of whom receive subsidies to make their insurance even more affordable.

In June, HHS and CMS finalized a rule that makes sweeping changes to ACA eligibility and enrollment. Set to take effect in August, the rule will – by the administration’s own estimates – immediately strip coverage from up to two million people. It shortens open enrollment windows, eliminates year-round enrollment for low-income individuals, adds extensive paperwork and verification requirements, and makes it harder to access health care tax credits. It also limits automatic reenrollment and imposes illegal monthly charges on consumers who qualify for zero-dollar premium plans. Attorney General James and the coalition argue that these changes directly undermine the ACA’s core mission of expanding access to affordable health care.

The rule also unlawfully prohibits states from including gender-affirming care in the ACA’s list of essential health benefits. Under the new policy, insurers would be prohibited from covering gender-affirming services as essential benefits when those services are related to gender dysphoria. The same treatments remain covered, however, when provided for other purposes, such as treating endocrine disorders or delaying early puberty. The attorneys general argue this discriminatory policy has no legitimate justification and will cause serious harm, especially to transgender youth and young adults. Research overwhelmingly shows that access to gender-affirming care reduces depression, anxiety, and suicidality in transgender youth. In New York, the policy conflicts directly with state law, which prohibits discrimination in health care based on gender identity and other protected characteristics.

To implement this rule, HHS is overriding states’ authority to operate their own ACA marketplaces, requiring all exchanges, including successful state-run systems like New York’s, to implement these harmful changes. In New York, more than 220,000 people get their health insurance through the ACA marketplace. Since the marketplace was established, New York’s uninsured rate has dropped from 11 percent to 4.8 percent. If the new rule goes into effect, however, an estimated 12,000 New Yorkers will suddenly lose their health insurance, and premiums will rise across the state. The state will have to spend over $10 million on staff time alone to update its systems in line with the new rule, and the state marketplace warns that some proposals, such as the increased income verification requirements, will be impossible to implement in time for the new plan year.

Attorney General James and the coalition argue that HHS’s new rule violates both the Administrative Procedure Act and the ACA. They are asking the court to block key parts of the rule from taking effect and ultimately vacate them in full to prevent the significant financial and public health consequences it would impose, especially on states that have invested in running their own exchanges.

Joining Attorney General James in filing this lawsuit are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Illinois, Maryland, Massachusetts, Maine, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Wisconsin, as well as the governor of Pennsylvania.