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Federal Court Decides ACA “Sabotage” Case

On March 4th, the U.S. District Court for the District of Maryland struck down four provisions of the Trump Administration’s Notice of Benefit and Payment Parameters for 2019, 83 Fed. Reg. 16930 (April 17, 2018) (the “2019 Rule”), which governs many aspects of Affordable Care Act (“ACA”) insurance markets beginning in the 2019 plan year.  The decision in City of Columbus, et al. v. Norris Cochran comes two and a half years after the cities of Columbus, Baltimore, Cincinnati, Chicago, and Philadelphia, as well as two individuals who rely on health insurance offered on ACA exchanges, filed suit alleging that the actions of the U.S. Department of Health and Human Services (“HHS”) drove up premiums, made enrollment more difficult, and caused more people to go without affordable, high-quality health insurance.

The plaintiffs originally filed suit against Donald J. Trump (in his official capacity as President of the United States) in August 2018, alleging that the Rule would eliminate protections guaranteed by the ACA, deter Americans from enrolling in quality health insurance plans, and drive up insurance costs. They further alleged that the Executive branch directed agencies to “sabotage” the ACA, committed various actions in an attempt to destabilize the exchanges, strategically worked to decrease enrollment, arbitrarily drove up premiums, and refused to defend the ACA. They claimed that these actions have caused premiums to rise and the number of uninsured to increase, harming the government plaintiffs by forcing them to spend more on uncompensated care. The complaint stated two causes of action, first under the Administrative Procedure Act (alleging that the 2019 Final Rule is arbitrary and capricious) and second under the Take Care clause of the Constitution (U.S. Const. Art. II, § 3).  The Court dismissed the Take Care claim in 2020.

In vacating four provisions of the Rule, the court held that HHS’s actions were either arbitrary and capricious or contrary to the ACA. The provisions of the Rule that were vacated by the court are:

Federal Review of Network Adequacy

The Rule’s removal of the federal government’s responsibility to ensure that insurance plans offer adequate provider networks was arbitrary and capricious.

Income Verification

The Rule’s requirement that low-income consumers submit additional documentation to verify their income when it conflicts with government data was arbitrary and capricious.

Standardized Options

The Rule’s elimination of “standardized options” — qualified health plans offering different levels of coverage and price, but with a standard cost-sharing structure specified by HHS that makes it easier for consumers to compare plans — was arbitrary and capricious.

Medical Loss Ratio

The Rule’s reduced medical loss ratio rebates was contrary to law. Plaintiffs argued that this provision made it easier for insurers to avoid paying legally required rebates to their customers.

The provisions relating to federal review of network adequacy, income verification and standardized options will now go back to HHS for further action. The MLR provision will not.

The court also held that HHS acted appropriately and in compliance with the law with respect to provisions in the Rule that eliminate direct notices to taxpayers that they are in danger of losing tax credits that allow them to afford health insurance; do away with federal oversight of insurance brokers participating in direct enrollment; revise standards for “navigators” who help people find insurance on exchanges; change aspects of the small business exchange program; and limit review of insurance rate increases.

Copyright © 2023, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 71

About this Author

Christine Clements, Sheppard Mullin Law Firm, Washington DC, Corporate and Health Care Law Attorney

Christine M. Clements is a partner in the Healthcare Team in the firm's Washington, D.C. office with 25 years of experience on managed care law issues. Ms. Clements focuses her practice on federal healthcare government contract programs, with particular focus on the Medicare Advantage Program, the Medicare Prescription Drug Benefit, the Federal Employees Health Benefits Program, Medicaid managed care, and the Medicare-Medicaid Plans. Ms. Clements advises clients on the issues most important to them, including contract applications and service area expansions, responses...


Susan Ingargiola is an associate in the Corporate Practice Group in the firm's New York office.

Areas of Practice

Susan advises healthcare organizations, including hospitals, health systems, insurers, community health centers, health information exchange organizations, pharmaceutical and biotechnology companies, and mobile app developers on health information privacy issues, including compliance with HIPAA and state medical record confidentiality laws, as well as other compliance- related matters. She conducts regulatory diligence in connection with...