Major Provisions of the Exchange Rules On Hold Pending Legal Challenge
The Federal Health Benefit Exchange Rules are once again being challenged in the courts. These rules are updated annually and, similar prior lawsuits in 2021 and 2025, a coalition of municipalities, providers, and small businesses, have filed a lawsuit challenging a number of the provisions of the Notice of Benefit and Payment Parameters for 2027 in the case of City of Columbus v. Kennedy, filed on June 3, 2026. Many of these are the same changes proposed and overturned by the predecessor cases. Subject to a request by the plaintiffs, eight of those provisions are now subject to a preliminary injunction granted on July 16, 2026.
Provisions Being Challenged
The following provisions are being challenged as being contrary to the Affordable Care Act (ACA):
- The “failure-to-reconcile” policy excluding individuals who fail to file taxes and reconcile prior Advance Premium Tax Credits (APTCs) from eligibility for APTCs going forward, contrary to the statutory provision guaranteeing access to APTCs for applicable taxpayers;
- The expansion of maximum out-of-pocket limits for bronze and catastrophic plans beyond statutory limits;
- The expansion of eligibility for catastrophic plans beyond limitations based on income and affordability in the ACA;
- The allowance of multi-year catastrophic plans, which are not allowed under the statute;
- The ability of carriers to sell health plans without provider networks, which are required in the ACA; and
- The prohibition of pricing silver plans based on cost-sharing reductions.
These and additional provisions are being challenged as violating the Administrative Procedure Act based on failure to justify the purpose of the provisions and adequately respond to comments:
- The requirement to verify when there is conflicting information about whether an individual’s income exceeds the federal poverty level, which impacts eligibility for APTCs;
- The elimination of the option for enrollees to attest to their income when tax return data is unavailable;
- Expanded verification requirements for Special Enrollment Periods (SEPs);
- Elimination of federal network adequacy standards;
- The elimination of standardized plans and limits on non-standardized plans; and
- The elimination of thresholds that allow individuals who owe limited unpaid premiums to maintain coverage.
Provisions Subject to the Preliminary Injunction
The court issued a preliminary injunction on eight of the provisions
- The “failure-to-reconcile” policy
- The expanded of maximum out-of-pocket limits for bronze and catastrophic plans
- The expanded eligibility for catastrophic plans
- The mandatory verification requirement for certain low-income individuals
- The elimination of income attestation
- Enhanced verification related to SEPs
- Elimination of federal standards for network adequacy
- Elimination of standardized plans and limitations on non-standardized plans
While the administration is likely to appeal the ruling, for many of the provisions it means that – for now – rules for 2026 remain in effect. However, carriers and Exchanges may need to take action to reverse changes to their plans and/or systems to ensure none of the provisions on hold are integrated into plans and processes for 2027.
Shortly after the stay was issued, CMS released guidance on the impact to “failure to reconcile” provision in particular. Looking forward, CMS will need to quickly issue rulemaking to enable the continuation of standardized plans, which will likely create delays in the certification period. CMS will also need to determine how to address consumers who have already enrolled in catastrophic plans under the new rule. More generally, carriers and enrollees remain in limbo into whether and when the contested provisions may go into effect.