Arizona, others sue feds over rule experts say cuts health care costs

In the 2027 Payment Notice, the Trump administration is trying to provide consumers with more options when shopping for health insurance, allowing insurers to offer varied plan designs and stopping limits on non-standardized plans, which allow insurers to offer different types of premiums and deductibles.

The payment notice will also allow non-network plans that let consumers choose health care options outside traditional networks and catastrophic plans with terms up to 10 years and adjustable cost-sharing options.

Attorney General Kris Mayes opposes the payment notice, saying it will remove “out-of-pocket protections” and push “ families toward catastrophic plans,” which will “move costs from insurers to patients and hospitals that can't afford it.”

"Millions of Americans will lose their health insurance because of these unlawful changes to federal policy," Mayes said.

In the lawsuit, the Democratic states said the changes made by the U.S. Department of Health and Human Services will “inexorably lead to higher costs and lower enrollment for consumers, higher uncompensated care costs for providers and state agencies, and substantial compliance costs for state-based exchanges.”

The Center Square reported last week that Democratic attorneys general conspired to file lawsuits against the Trump administration more than six months before he even won the 2024 presidential election.

The plaintiffs say the payment notice unlawfully reinstates previously struck-down requirements for income verification and enrollment.

They are asking a judge from the U.S. District Court for the Northern District of California to block the payment notice from taking effect.

James Capretta, a senior fellow who studies healthcare policy at the American Enterprise Institute, told The Center Square that these policy changes could reduce health insurance costs.

He said the policy changes attempt to “deregulate the barriers” for people seeking catastrophic plans more easily, while also allowing greater regulatory flexibility to give these plans more room to operate and provide coverage.

The non-network plans policy change has the opportunity to create price competition, he added.

The healthcare market is “in need of some positive instruction that pushes downward pressure on pricing; I think these are the kinds of ideas that should be allowed at least some test,” Capretta said.

Ed Haislmaier, a healthcare policy analyst at the Heritage Foundation, told The Center Square that these policy changes are an attempt to undo actions taken during the Biden administration, which tried to standardize ACA health care plans.

Haislmaier said the Biden administration tried to make the plans “as free as possible and let [people] pick [them] up anytime.”

He noted this approach “created openings for fraud and improper enrollment.”

Democrats focus on getting people on the program while Republicans focus on getting money to the people it is targeted for and not wasting money, Haislmaier said.

The new policy changes implemented by HHS are trying to clean up improper enrollments, he noted.

The payment notice adds extra verification for special enrollment periods and income verification. Starting in 2028, people buying health insurance off the ACA will need to file and reconcile their taxes to stay eligible for premium tax credits.

According to Haislmaier, two submarkets exist within the ACA market.

The largest of the two markets, which makes up an estimated 75% of the ACA market, is people who are “low-income,” without employer-sponsored coverage, and who don’t qualify for Medicaid because they make too much money, Haislmaier said.

He added that this submarket includes people who get subsidies to help buy health insurance.

The other submarket that makes up 25% of the ACA market is self-employed people, such as small business owners and freelancers, who don’t have access to employer coverage, Haislmaier said.

In total, Haislmaier said approximately 20 million people make up these submarkets.

Haislmaier said HHS’ policy changes are attempting to allow for “more flexibility, more options and lower premiums” for self-employed people who make too much money.

The Biden administration focused on low-income people without employer-sponsored coverage, Haislmaier said.

The ACA has made these self-employed people’s health insurance more expensive and narrower over the years, he said.

Besides Arizona, the attorneys general from California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, Washington and Wisconsin, as well as Pennsylvania Gov. Josh Shapiro, joined the lawsuit.