August 19, 2019

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CMS Proposes “Wind Down” Plan for Federal Exchanges

Despite the Trump Administration’s unsuccessful attempts to fully repeal and replace the Affordable Care Act (the “ACA”), the Administration has continued to target the ACA. In the Administration’s latest salvo, the Centers for Medicare & Medicaid Services (“CMS”) announced in its Fiscal Year 2019 Performance Budget (the “Budget”)[1] – as released by the federal Office of Management and Budget on February 12, 2018 – a proposal to “wind down” its financial support for the federal health insurance exchanges. Specifically, the Budget explains that if Congress repeals the ACA, CMS will withdraw its support of the federal exchanges by plan year 2020.

In the Budget, CMS requests funds totaling approximately $2.4 billion to continue certain operations of the various programs it administers, including Medicare, Medicaid, the Children’s Health Insurance Program, and the federal health insurance exchanges, marking a decrease of approximately $403.6 million from last year’s request.[2] In connection with the proposed decrease, CMS plans the “wind down” of the federal exchanges for plan year 2020 as states transition to new Market-Based Health Care Grants. Ultimately, CMS hopes the Market-Based Health Care Grant Program will give states the ability to more effectively oversee their own insurance markets and expand enrollment options. However, CMS conditions its request by explaining that the Budget “assumes passage of legislation to repeal and replace Obamacare, which would phase down the Federal Exchanges as the new Market-Based Health Care grants become available in plan year 2020.”[3]

The ACA currently allows each state the opportunity to establish its own health insurance exchange to help its citizens and small employers purchase affordable health insurance coverage. While some states have taken full advantage of this opportunity, such as California and New York, other states, such as Texas and Florida, still heavily rely on the federal exchanges to promote health insurance coverage for their citizens.[4] Without the federal health insurance exchanges, the states that continue to rely solely on such exchanges may have a difficult time transitioning to CMS’s new Market-Based Health Care Grant Program.

In addition to the Budget, the White House budget blueprint, released earlier this year, discusses a two-part approach to repeal and replace the ACA, the first of which is the enactment of legislation modeled closely after the Graham-Cassidy-Heller-Johnson (“GCHJ”) bill as soon as possible, which will allow for the funding of CMS’s new Market-Based Health Care Grants to states.[5] The second part of the two-step approach includes the enactment of additional reforms to address healthcare spending and establish support for the new GCHJ-like bill.

While it is difficult to predict whether CMS will be able to implement its plan to “wind down” the federal health exchanges, given Congress’ lack of success in recent months to repeal and replace the ACA, history suggests that this Administration will nonetheless persist in its efforts to dismantle the law.

[1] Department of Health and Human Services, Centers for Medicare & Medicaid Services, Fiscal Year 2019 Performance Budget ( Downloads/FY2019-CJ-Final.pdf)

[2] Id.

[3] Id.

[4] The Marketplace in your state, (

[5] An American Budget, Fiscal Year 2019 Budget of the U.S. Government, U.S. Office of Management and Budget (

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.


About this Author

Cody Fierro, Sheppard Mullin, Healthcare attorney

Cody J. Fierro is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm's Healthcare Team.


  • J.D., University of California, Hastings, 2017, magna cum laude, Order of the Coif,Thurston Society
  • B.S., University of Arizona, 2013

He is admitted to practice in California. 

Matthew Goldman, Corporate Attorney, Sheppard Mullin Law Firm

Matthew Goldman is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm's healthcare practice team.

Areas of Practice

Matthew’s practice blends the regulatory and transactional components of healthcare law, and includes representation of hospitals, managed care organizations, medical groups, and other healthcare entities and providers. On the regulatory side, Matthew’s practice is focused on licensing, regulatory compliance, and managed care arrangements. Matthew has extensive experience preparing Knox-Keene HMO license applications and assisting clients with structuring shared-risk arrangements, developing and utilizing innovative payment methodologies, and ensuring compliance with applicable federal and state law. Matthew’s transactional practice is focused on mergers and acquisitions, joint ventures, and strategic alliances in the healthcare sector. 

Jordan Grushkin, Attorney, Sheppard Mullin Law Firm, Health Care

Jordan Grushkin is an associate in the Corporate Practice group in the firm's Century City office.

  • J.D., Georgetown University Law Center, 2015

  • B.A., Georgetown University, 2015, magna cum laude