On July 17, 2025, the State of California joined by 20 states, including New York,¹ as well as advocacy organizations,² filed a lawsuit in the US District Court for the District of Massachusetts against US Department of Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr. and other federal officials and agencies.³ The plaintiffs in the case, California v. Kennedy, are seeking injunctive relief (a court order requiring a party to either take or not take a specific action) to block the implementation of a finalized federal rule, the Patient Protection and Affordable Care Act: Marketplace Integrity and Affordability (hereafter referred to as the Rule. That Rule will otherwise go into effect August 25, 2025, nationwide and significantly alter key regulations implementing the Affordable Care Act (ACA). Central to this litigation is the legality of the and what power and scope the courts have to limit federal agency rules Trump v. CASA.⁴

The Rule imposes a series of restrictions on coverage under the ACA that HHS estimates will result in up to 1.8 million enrollees losing coverage nationally in plan year 2026.⁵  Changes to coverage from the Rule are expected to most directly impact the roughly 226,000 New Yorkers who are enrolled in a Qualified Health Plan (QHP) through the NY State of Health (NYSOH)—New York’s state-based ACA marketplace. Through NYSOH, New Yorkers can receive federal tax credits that help reduce their premium payments on a sliding scale up to 400 percent of the federal poverty level (FPL).⁶ Certain changes are likely to impact New Yorkers who have health coverage through their employer as well.  However, because New York is both a state that has expanded Medicaid coverage eligibility under the ACA and currently operates a Basic Health Plan option, known as the Essential Plan, individuals with incomes up to 250 percent FPL in New York should be less significantly impacted.

In addition to analysis from both the Rockefeller Institute⁷ and others regarding various federal health policy changes, as well as broader analysis⁸ about the Rule itself, we recently posted a separate summary of the Rule focused particularly on the impact for New York.⁹ This blog discusses the arguments raised in California v. Kennedy and how the Supreme Court’s decision in Trump v. CASA may constrain the Massachusetts federal district court’s authority to issue nationwide injunctive relief.  

Changes to coverage from the Rule are expected to most directly impact the roughly 226,000 New Yorkers who are enrolled in a Qualified Health Plan (QHP) through the NY State of Health (NYSOH)—New York’s state-based ACA marketplace.

The ACA and HHS Rule

Enacted in 2010, the Affordable Care Act (ACA) created sweeping reforms in the private health insurance market, including the creation of health insurance exchanges,¹⁰ advance premium tax credits, and protections for individuals with preexisting conditions.¹¹ In addition to the ACA, subsequent companion federal regulations¹² have filled in critical administrative details, governing everything from eligibility verification to enrollment timing and grace periods for lapsed coverage.

As noted above, the Rule at issue in California v. Kennedy is discussed in more detail in other analyses, including one by the Rockefeller Institute.¹³ In summary, the Rule includes both permanent and temporary effects and changes for impacted health plan enrollees.

Permanent Effects14	Temporary Effects15 (only for 2026 plan year)
Fewer benefits	Significant new paperwork verification requirements such as presenting original paperwork as proof of tax and citizenship instead of the current automated verification process
More expensive coverage	Newly allowing insurers to deny coverage for past-due premiums
Shorter enrollment periods	Adopting a $5 monthly premium payment for certain enrollees who are currently eligible for a $0 premium
Limiting automatic re-enrollment for certain enrollees	Requiring the Federally Facilitated Marketplace (FFM) to verify eligibility for new special enrollment period (SEP) enrollments
Eliminating coverage for certain deferred action for childhood arrivals (DACA) individuals
Prohibiting coverage of gender-affirming care

The Rule includes provisions that were struck from the One Big Beautiful Bill Act (OBBBA) by the Senate parliamentarian before it was passed because the provisions did not comply with the rules for passing a budget reconciliation bill with a simple majority. ¹⁶ The Rule, therefore, essentially allows the Trump administration to accomplish a similar result through different means (regulation). Because rulemaking is generally easier to modify than statute, however, the Rule’s provisions could be modified by a future administration without consent from Congress.

Arguments by Plaintiff States and Defendant Federal Government

Arguments by Plaintiff States

California and its 20 co-plaintiffs, including New York, have raised multiple statutory and constitutional claims challenging the Rule. Chief among them are:

• Violation of the Administrative Procedure Act (APA). Plaintiffs contend that the Rule is arbitrary and capricious under provisions of the federal APA (5 U.S.C. § 706(2)(A)), which establishes a standard for federal agencies to follow when creating rules and making decisions. Plaintiffs contend that HHS failed to adequately consider the interests of states and enrollees, did not provide sufficient evidentiary support for the need to change existing rules, and failed to account for adverse impacts on low-income populations. Plaintiffs have also argued that HHS did not provide sufficient time for public comment—only 23 days instead of the typical 30-day period.
• Contravention of the ACA. Plaintiffs argue that the Rule contradicts express provisions of the ACA, including statutory definitions of “minimum essential coverage” and congressional intent to broaden—not restrict—access to health insurance.
• Federalism and Tenth Amendment Concerns. Several plaintiff states further assert that the Rule unlawfully interferes with their state-administered Medicaid and Basic Health Programs by altering eligibility standards and coverage definitions in ways that exceed HHS’s statutory authority.¹⁷

In particular, plaintiffs have raised six grounds, or causes of action, in their request for relief to the federal District Court. In the first cause of action, plaintiffs contend that the 23-day comment period was inadequate under the Administrative Procedures Act, which they assert should have provided at least 30 days.

The second cause of action is the most detailed, alleging that the Rule is arbitrary and capricious under the APA. In essence, plaintiffs contend that HHS failed to provide adequate reasons for numerous changes in the Rule, nor did they meaningfully respond to comments about those proposed changes as required under the APA. In particular, plaintiffs cite the following changes, noting the lack of sufficient rationale by HHS for each:

• the $5 premium penalty on automatic re-enrollees with no premium under ACA tax credits;
• the shortened annual open enrollment period during which individuals are able to sign up for coverage;
• requirements for states using the Federal Facilitated Marketplace (FFM) to conduct certain eligibility verification for a Special Enrollment Period (SEP), which allows enrollment outside the annual open enrollment period for individuals with life-changing events such as loss of employment, divorce, birth of a child;
• revocation of the guaranteed issuance of coverage for individuals with past-due premiums, allowing insurers to deny enrollment for failure to pay premiums in the past; and
• revisions to the ranges for actuarial value (the overall value of benefit coverage afforded to an average population with that plan), which allow insurers to lower the value of the benefits provided.

In the third cause of action, plaintiffs argue that exclusion of coverage for gender affirming care as a benefit for the required minimum level of comprehensive coverage—known as the Essential Health Benefits (EHB)—is arbitrary and capricious in violation of the APA.

In the fourth, fifth, and sixth causes of action, plaintiffs contend that HHS acted in excess of the statutory authority granted by Congress, also in violation of the APA. The plaintiffs focus on two provisions in the Rule. First, plaintiffs argue that the $5 premium penalty on re-enrollees who have no premiums under the ACA violates the ACA, and that Congress gave HHS no authority to institute such a premium penalty. Further, plaintiffs note that, under the ACA, HHS must make certain that the scope of mandatory benefits (called “Essential Health Benefits” or EHB) is determined by a survey of employer-sponsored coverage, and HHS failed to do this when barring coverage of gender dysphoria treatment for EHB. Here, the plaintiffs cite case law noting that an executive agency “has no power to act… unless and until Congress confers power upon it”.

Arguments by HHS

In opposition, HHS has argued against any preliminary order by the court on the grounds that the plaintiff states are not likely to succeed at the end of the day. HHS contends that it gave enough notice under the APA, counting the time HHS posted the proposed Rule on the agency’s website days before the proposed Rule was officially published in the Federal Register. Similar to published comments on the Rule, HHS broadly justified the Rule as necessary to prevent fraud, reduce improper payments, and ensure program integrity¹⁸—a lens through which many of the recent health-related federal policy changes have been framed by Congress and the Trump administration. In this case, HHS has suggested the Rule is needed at least in substantial part to address a perceived improper enrollment problem. As to the exclusion of EHB coverage for gender-affirming care, HHS addressed its failure to conduct the ACA-required survey by contending that its original survey, when EHB standards were first adopted after the ACA was enacted, is enough, and further surveying should not be required for specific changes regarding particular benefits. In addition, HHS relies on the fact that many other states have selected EHB plans that do not include coverage of gender-affirming care. With regard to DACA coverage, HHS argues that the change is necessary given the immigration policies of Congress and the Trump administration.

The plaintiffs are requesting a preliminary and permanent injunction to halt the implementation of the Rule nationwide. This is where Trump v. CASA is important, as the application of injunctive relief may be limited following the Supreme Court’s decision in that case.

The Supreme Court’s Decision in Trump v. CASA

Decided in June 2025, the decision in Trump v. CASA reshapes the landscape of injunctive relief issued by federal district courts. In a 6–3 decision authored by Chief Justice Roberts, the Court held that federal district courts lack authority to issue universal (nationwide) injunctions absent a specific statutory grant or authorization to do so vis-à-vis a law enacted by a legislative body. In its decision, the Court emphasized that the customary ability of courts to order someone to do (or stop doing) something is generally applicable to parties to the lawsuit under Article III¹⁹ of the US Constitution. The Court further warned against federal courts overreaching in a way that effectively transforms individual cases into legislative vetoes, a power constitutionally granted to the president. The decision formally overturned a series of lower court precedents that had permitted nationwide injunctions in Administrative Procedures Act (APA) cases. The majority held that even where a rule is facially invalid, meaning it cannot be enforced constitutionally under any circumstances, under the APA, district courts must limit their orders to addressing the injuries of the parties before them. Writing for the dissent, Justice Sotomayor expressed concern for a “patchwork of legality” where some jurisdictions are bound by invalid regulations while others are not, undermining the uniform application of federal law.²⁰

In light of Trump v. CASA, the Massachusetts district court will need to carefully tailor any injunctive relief it grants in California v. Kennedy. As a result, several implications follow:

1. No Nationwide Injunction. Even if the court agrees with the plaintiffs that the Proposed Rule is unlawful under the APA, Trump v. CASA precludes it from ordering HHS to stop the Rule’s application to nonparty states or entities. Any such court injunction is likely to extend only to the named plaintiffs—California, New York, and the other plaintiff states and organizations.
2. Geographic Fragmentation. The decision could lead to a scenario where the Proposed Rule is blocked in plaintiff states but enforced elsewhere, resulting in uneven access to ACA benefits and compliance burdens for insurers operating across state lines. This raises complex questions about the operational feasibility of the Rule, especially for national insurers and multistate exchanges. For example, the DACA change could cost New York approximately $80 million annually, should the state provide equivalent care to the DACA population, raising new questions to those already posed by the OBBBA for New York lawmakers regarding coverage for noncitizens. The DACA population is the subject of a related federal case, Kansas v. United States, brought by Republican states challenging a Biden-era rule related to DACA coverage. If the Rule is implemented, the Kansas v. United States case will be unnecessary. How to address the DACA population will be among the more immediate decisions confronting state policymakers, given the August 25 effective date, absent injunctive relief in California v. Kennedy.
3. Increased Role for Appellate Courts and Inter-Circuit Conflicts. Because no single district court can block the Rule nationwide, the case is likely to become part of a broader litigation mosaic. Other states may file parallel suits in other districts, and eventual resolution may come only through the appellate courts or the Supreme Court.
4. Enforcement and Administrative Discretion. Even within the plaintiff states, the scope of relief may be contested. For example, the district court may order HHS not to enforce the Rule only as it applies to state agencies or residents enrolled in certain programs. HHS may respond with guidance or “selective enforcement” policies designed to mitigate the disruption—though such moves could themselves become legally contentious. How the District Court will handle the administrative discretion will be instructive. In another relatively recent decision, Loper Bright v. Raimondo,²¹ the US Supreme Court overruled a longstanding legal doctrine under which federal courts afforded broad discretion to federal agencies. The Loper decision requires federal courts to use their independent judgment in deciding whether a federal agency has acted within its statutory authority, and courts may not defer to an agency’s interpretation of the law simply because a statute is ambiguous.

Strategic Considerations for the Plaintiffs

Given the constraint imposed by Trump v. CASA, the plaintiffs in California v. Kennedy may consider one or more of the following strategies:

• Seek Class Certification. By certifying a nationwide class of affected individuals under Federal Rule of Civil Procedure 23, plaintiffs may attempt to achieve functionally broad relief while staying within the bounds of party-specific adjudication established by the decision in Trump v. CASA.
• Rely on APA § 706(2) Arguments. Plaintiffs may argue that invalidating the Proposed Rule under the APA naturally compels vacatur—whereby the court vacates or sets aside a regulation, effectively removing or voiding its legal force—as a remedy that applies nationally. However, Trump v. CASA suggests that courts must distinguish between vacatur and injunction, potentially limiting even APA-based remedies to plaintiff-specific outcomes.
• Coordinate Parallel Litigation. Blue states and advocacy groups not party to this case may file copycat suits in sympathetic jurisdictions, aiming to build a critical mass of adverse rulings that compel HHS to withdraw or revise the Rule.
• Appellate Review. If relief is denied or limited, plaintiffs may seek review by the First Circuit and ultimately the Supreme Court, potentially testing the outer limits of Trump v. CASA in the context of nationwide programs like the ACA.

Conclusion

California v. Kennedy presents a significant test case not only for the legality of HHS’s Proposed Rule but also for the federal judiciary’s evolving role in administrative oversight after Trump v. CASA. While plaintiffs have some substantive arguments under the APA and ACA, the Supreme Court’s recent curtailment of nationwide injunctions will likely restrict the Massachusetts district court’s ability to provide sweeping national relief.

Interestingly, some states that are most impacted by the Rule are not party to the case and, therefore, are unlikely to benefit from potential injunctive relief. Nevertheless, New York and other plaintiff states have a greater likelihood of being awarded injunctive relief for the portions of the Rule most applicable to New York, should the district court decide in the plaintiffs’ favor. These components include: fewer benefits, shortened open enrollment periods, increased premiums and out-of-pocket costs for consumers, stricter documentation requirements, limits on DACA enrollment, and the coverage of gender-affirming care. These changes will result in loss of coverage, new costs to the state, and the potential for increased costs to purchase less coverage, among other things.

HHS’s decision to provide flexibility to the 13 state-based exchanges and New York’s unique coverage options, such as the Basic Health Plan, automatically creates a dichotomy in application between states. In addition, the limitations on judicial action outlined in the CASA ruling may result in the California v. Kennedy decision further exacerbating differences in a uniform application of marketplace rules, potentially undermining the intent of the ACA. Therefore, this case underscores the emerging tension between the need for uniform regulatory rules in national programs like the ACA and the judiciary’s increasingly fragmented capacity to adjudicate administrative disputes. Unless Congress amends the APA or the Supreme Court revisits its stance, the path forward for challengers to federal rules will require creative litigation strategies. The Rockefeller Institute of Government will continue to monitor key developments as this and other cases unfold with respect to their impacts on the healthcare of New Yorkers.

For more information about the programs described in this blog post, see: How Healthcare Changes in Washington Could Affect New York.

ABOUT THE AUTHOR(S)

Troy Oechsner is a fellow at the Rockefeller Institute of Government
Jillian Kirby Bronner is a special advisor to the New York State Budget Director and a guest author of the Rockefeller Institute of Government
Courtney Burke is senior fellow for health policy at the Rockefeller Institute of Government

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¹ State of California, Commonwealth of Massachusetts, State of New Jersey, State of Arizona, State of Colorado, State of Connecticut, State of Delaware, State of Illinois, State of Maine, State of Maryland, State of Michigan, State of Minnesota, State of New Mexico, State of Nevada, State of New York, State of Oregon, Josh Shapiro, in his official capacity as Governor of the Commonwealth of Pennsylvania, State of Rhode Island, State of Vermont, State of Washington, State of Wisconsin.

² See, for example, an amicus brief filed in support of the litigation.

³ Robert F. Kennedy, in his official capacity as Secretary of Health and Human Services, Mehmet Oz, in his official capacity as Administrator for the Centers for Medicare and Medicaid Services, US Department of Health and Human Services, US Centers for Medicare and Medicaid Services

⁴ According to a University of Michigan, Michigan Law analysis, “In its June 27 decision in Trump v. CASA, the US Supreme Court limited the scope of federal courts to block presidential policies nationwide. The issue before the justices was whether federal courts in three cases could issue universal injunctions against President Trump’s Executive Order 14160 limiting birthright citizenship. The majority opinion by Justice Amy Coney Barrett did not address the merits of the birthright citizenship order.”

⁵ HHS estimates a reduction in marketplace coverage between 725 million (lower bound) to 1.8 billion (upper bound) individuals. HHS details the complexity in estimating the impact of the Rule here, but in short, they note that they believe a significant amount of the impact is concentrated in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah, where they believe there were “improper enrollments.”

⁶ The federal poverty level (FPL) in 2025 is $15,650 for an individual and $32,150 for a family of four; 400 percent of the FPL is $62,600 for a single person and $128,600 for a family of four (https://aspe.hhs.gov/sites/default/files/documents/dd73d4f00d8a819d10b2fdb70d254f7b/detailed-guidelines-2025.pdf).

⁷ For more information, see: How Health Policy Changes in Washington Could Affect New York and “An Analysis of the One Big Beautiful Bill Act (OBBBA’s) Impact on Healthcare for New York.”

⁸ See, e.g., https://www.healthaffairs.org/content/forefront/hhs-finalizes-aca-marketplace-rule-part-1-enrollment-restrictions-premiums-actuarial; https://www.healthaffairs.org/content/forefront/hhs-finalizes-aca-marketplace-rule-part-2-income-and-sep-verification-failure-reconcile. But see also, https://paragoninstitute.org/paragon-prognosis/answering-the-critics-how-paragon-discovered-enrollment-fraud-in-the-aca-exchanges/.

⁹ The Rockefeller Institute of Government is closely monitoring activity at the federal level that could have implications for New York. In addition to enactment of the One Big Beautiful Bill Act (OBBBA), summarized in a recent blog post, the Trump administration has taken administrative actions that have additional impacts to New York, which have also been summarized in our recent policy brief.

¹⁰ Sixteen states, including New York, operate a state-based health insurance exchange. In New York, the health insurance exchange is called New York State of Health.

¹¹ According to HHS, a preexisting condition is: “A health problem, like asthma, diabetes, or cancer, you had before the date that new health coverage starts. Insurance companies can’t refuse to cover treatment for your pre-existing condition or charge you more.”

¹² There are many federal regulations implementing the ACA from multiple agencies. Some of the core regulations were promulgated by HHS in 45 CRF Parts 155 and 156 (see https://www.federalregister.gov/documents/2013/06/04/2013-13149/patient-protection-and-affordable-care-act-establishment-of-exchanges-and-qualified-health-plans; https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-B/part-156?toc=1 ).

¹³ See also recent Rockefeller Institute of Government publications: How Health Policy Changes in Washington Could Affect New York and “An Analysis of the One Big Beautiful Bill Act (OBBBA’s) Impact on Healthcare for New York.”

¹⁴ For the purposes of this paper, permanent is defined as changes that will be permanent unless changed by a subsequent new regulation, statute, or court ruling.

¹⁵ For the purposes of this paper, temporary changes are defined as changes which are temporary, generally expiring at the end of the 2026 plan year (December 31, 2026).

¹⁶ See, https://www.kff.org/tracking-the-affordable-care-act-provisions-in-the-2025-budget-bill/ ; see also, https://www.jdsupra.com/legalnews/health-care-week-in-review-senate-9720433/.

¹⁷ Complaint of Plaintiffs in California v. Kennedy, at Fourth, Fifth, and Sixth Causes of Action, and Comments on Proposed Rule from California, Massachusetts, and New Jersey, which is amended to Plaintiffs’ Complaint (https://litigationtracker.law.georgetown.edu/wp-content/uploads/2025/07/State-of-California-et-al_2025.07.17_COMPLAINT-FOR-DECLARATORY-AND-INJUNCTIVE-RELIEF.pdf). As the plaintiffs state, ”The result of the implementation of the Final Rule’s provisions is that millions of Americans will lose health coverage. Those who maintain coverage will pay higher premiums for diminished coverage and will spend more on out-of-pocket costs to use that coverage (in the form of co-pays and deductibles). And when these newly uninsured individuals need healthcare—as everyone eventually will—the States will bear the cost. State and local governments will pay for the dramatic increase in uncompensated care costs for individuals who become uninsured as a result of the Final Rule. State Medicaid expenditures will balloon as people who lose their subsidized marketplace coverage will turn to publicly funded healthcare as a backstop. And States will lose tax revenue derived from insurance premiums no longer paid by those who have dropped or lost coverage as a result of these changes.” (Complaint, at paragraph 243, page 70-71).

¹⁸ https://www.cms.gov/files/document/cms-9884-f-2025-pi-rule-master-5cr-062025.pdf.

¹⁹ According to the Federal Judicial Center, “There are currently four Article III courts: The Supreme Court of the United States, the US courts of appeals, the US district courts, and the US Court of International Trade. Congress has abolished, combined, or reorganized several other Article III courts over time. Such courts include the US circuit courts, the Court of Claims, the US Customs Court, and the Supreme Court of the District of Columbia.”

²⁰ https://www.supremecourt.gov/opinions/24pdf/24a884_8n59.pdf.

²¹ https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf.