A Court Reopens the 2027 ACA Risk Pool Mid Rate-Filing

Judge Brendan Hurson of the U.S. District Court for the District of Maryland enjoined eight provisions of CMS's 2027 Notice of Benefit and Payment Parameters on July 16, 2026, four days before they were due to take effect, and ordered Exchanges to stop removing enrollees for failing to file and reconcile prior-year premium tax credits (AHA News, July 2026). Insurers had already filed 2027 marketplace rates assuming that cutoff would keep purging non-filers from a pool effectuated enrollment had already shrunk to 19.2 million from 22.1 million a year earlier (ASPE, June 2026).

What the July 16 Injunction Actually Reopened

The case is City of Columbus v. Kennedy, No. 26-cv-2215 in the District of Maryland, filed June 3, 2026, by a coalition of municipalities, physician groups, and small-business advocates against the same 2027 Payment Notice CMS had finalized six weeks earlier (Groom Law Group, 2026). Judge Hurson's July 16 order stayed eight provisions on Administrative Procedure Act grounds, and the two most consequential for actuaries sit inside 45 C.F.R. § 155.305(f)(4), the section governing premium tax credit eligibility: the reinstatement of a one-year failure-to-file-and-reconcile cutoff for Federally-Facilitated Exchange enrollees, and a related rollback of the automatic 60-day extension the Exchange grants when an applicant's reported income does not match IRS or Social Security data (Norton Rose Fulbright, July 2026). The remaining six enjoined provisions, expanded out-of-pocket bands for bronze and catastrophic plans, broadened catastrophic hardship-exemption eligibility, new income-documentation burdens for low-income and no-tax-data applicants, a rollback of pre-enrollment special-enrollment-period verification, relaxed network adequacy review, and elimination of standardized plan options, carry their own pricing and network implications but do not directly reopen the enrollment base the way the reconciliation cutoff does.

CMS's own account of the rule frames the reconciliation cutoff as an anti-fraud measure, not a technical adjustment. "American taxpayers deserve to know their dollars are going only to people who truly qualify," CMS Administrator Mehmet Oz said when the rule was finalized (CMS, May 2026). Before the 2027 rule, an enrollee lost premium tax credit eligibility only after two consecutive years of failing to file a tax return reconciling advance payments against actual income; the finalized rule cut that to one year for FFE states beginning plan year 2027, with SBEs given the option to delay to a one-year standard through 2027 and required to adopt it by 2028. Judge Hurson's injunction froze that acceleration in place: the two-year policy now governs both plan year 2026 and plan year 2027, and CMS's July 22 implementation guidance directed Exchanges to immediately stop denying or removing advance premium tax credits from any enrollee, new or existing, on the basis of the one-year standard (AHA News, July 2026).

The Pool an Actuary Priced Was Already Shrinking Before the Rule Even Applied

The injunction lands on a marketplace that had already absorbed the largest single-year contraction in its history. HHS's Assistant Secretary for Planning and Evaluation reported effectuated marketplace enrollment fell to 19.2 million in February 2026, down from 22.1 million a year earlier, a 13% decline the agency attributes almost entirely to removal of enrollees it considers improperly enrolled rather than to affordability-driven attrition, putting the improperly enrolled figure at roughly 2.9 million (ASPE, June 2026). That framing matters for rate-setting because it is the opposite of a typical adverse-selection story: HHS's position is that the enrollees leaving the rolls were disproportionately low-utilization, improperly subsidized, or otherwise non-representative of genuine risk, which is precisely the assumption an actuary would use to argue the residual pool's morbidity should improve, not worsen, as the purge continues.

Preliminary 2027 rate filings priced against exactly that continuation. Insurers across 77 filers in 16 states and Washington, D.C. proposed a median 2027 increase of 14%, and issuers attributed roughly four percentage points of both the 2026 increase and the projected 2027 increase to a sicker residual risk pool as the one-year reconciliation cutoff and other eligibility tightening continued to remove marginal enrollees (Peterson-KFF Health System Tracker, July 2026). Actuaries build that kind of pool-effect load as a net figure: it nets the higher per-member cost of a smaller, sicker pool against whatever offsetting improvement comes from removing genuinely improper or non-representative enrollees. The injunction does not touch the affordability-driven attrition side of that net. It removes the improper-enrollee-removal side, which was the offsetting, morbidity-improving half of the calculation, precisely the assumption the four-point pool load was built on.

Re-Running the Second Morbidity Load After the Filing Is In

The mechanical problem for a 2027 actuarial memorandum already submitted is that morbidity assumptions are not built once; they are built in layers, and this injunction knocks out a load in the second layer rather than the first. The first layer, projected medical and pharmacy trend applied to the current base period, is unaffected by the ruling. The second layer, the pool-composition adjustment that accounts for who is expected to be enrolled in the rating period relative to the base period, is exactly what the reconciliation-cutoff reversal invalidates. An actuary who built a 2027 pool-morbidity factor assuming the one-year cutoff would continue thinning the rolls of non-filers through the rating year now has a factor calibrated to an enrollment base that federal policy no longer permits Exchanges to enforce.

The correction is not simply reversing a sign. Restoring an enrollee who failed to reconcile a prior year's subsidy does not necessarily restore a person with average-pool morbidity; the population caught by a failure-to-reconcile rule skews toward lower income-verification confidence and, per HHS's own framing of the 2.9 million figure, toward enrollees the agency views as more likely improperly subsidized in the first place. An actuary re-estimating the second morbidity load has to separate that restored population's expected utilization from the base pool's, which requires either encounter data on enrollees CMS had begun flagging for removal before the injunction, or a defensible proxy built from the demographic and subsidy-tier profile of enrollees affected by the 2024 and 2025 FTR sweeps CMS has already published operational guidance on. Neither is a trivial substitute for the direct data an insurer would ordinarily use to size a pool-composition load, and the memorandum now has to disclose which approach it used and why, since the number it replaces was submitted under a since-invalidated assumption.

Provision	As Finalized, May 2026	Status After July 16 Injunction
FTR cutoff, FFE states	One-year cutoff beginning PY2027	Enjoined; two-year cutoff applies through PY2027
FTR cutoff, SBE states	State option through PY2027, mandatory one-year by PY2028	Enjoined; SBEs retain full discretion while stay is in force
60-day income-inconsistency extension	Eliminated	Reinstated per CMS's July 22 guidance
Documentation for sub-100% FPL and no-tax-data applicants	New verification requirement	Enjoined
Bronze/catastrophic OOP band expansion (130%)	Effective PY2027 (bronze), PY2028 (catastrophic)	Enjoined
FFE and SBE-FP user fees	1.9% FFE, 1.5% SBE-FP, both down from 2026	Not challenged; in effect for PY2027

The User Fee Cut Pulls the Rate Build the Other Way

The same final rule that reinstated the reconciliation cutoff also lowered the administrative fee load issuers carry, and that reduction was never part of the litigation, which means it interacts directly with the reversed morbidity assumption inside the same rate build. CMS finalized the 2027 Federally-Facilitated Exchange user fee at 1.9% of premium, down from 2.5% in 2026, and the SBE-FP fee at 1.5%, down from 2.0%; the HHS risk adjustment user fee also dropped, to $0.18 per member per month for 2027 from $0.20 in 2026 (CMS, May 2026). A 0.6-percentage-point FFE fee cut is not a rounding error in a rate build; applied against a benchmark silver premium, it is a comparable order of magnitude to the pool-morbidity load actuaries are now having to rebuild upward. The two adjustments move in opposite directions inside the same filing: the fee cut was calibrated by CMS assuming the one-year reconciliation cutoff would hold and keep the pool smaller and, by the agency's framing, less burdened by improper claims administration costs, while the morbidity correction actuaries now owe assumes the opposite, a larger and less-selected pool than the fee schedule was built around.

That is a genuine net-rate question, not a wash. Whether a given issuer's 2027 rate comes out higher or lower than originally filed depends on the relative size of its pool-morbidity correction against its fee-load relief, and that ratio varies by issuer depending on how large a role failure-to-reconcile removals played in that issuer's specific book. An issuer whose enrollee base skewed heavily toward the population CMS was targeting with the one-year cutoff, subsidized enrollees with thin tax-filing histories, will see a larger morbidity correction relative to its fee-load benefit than an issuer whose base was more stable. CMS's own fee reduction was not designed with this offset in mind; it was calibrated against the rule as finalized, not the rule as enjoined, which is exactly the kind of internal inconsistency an injunction arriving after a rule's component pieces have already been separately priced tends to produce.

A Narrow Window Collides With the QHP Certification Calendar

CMS did not leave the correction to issuers' discretion on an open-ended timeline. Following the injunction, the agency issued revised Plan Year 2027 QHP data submission and certification timeline bulletins on July 31 and August 4, 2026, adjusting the sequence issuers and Exchanges follow between initial rate submission, CMS review, and final plan confirmation for the fall enrollment period. That compressed window is the real constraint on how thoroughly an issuer can rebuild its second morbidity load: a full re-estimation using restored-enrollee encounter data, rather than a proxy built from prior FTR-sweep demographics, takes longer to assemble than the revised certification calendar affords in most states. Issuers filing in states where CMS itself performs rate review face the most direct exposure, since CMS's own July 22 guidance and its revised certification bulletins are the operative deadlines; issuers in states with independent rate review face a parallel question of whether their state regulator will accept a mid-cycle amendment to an actuarial memorandum built on an assumption the memorandum's author knew, at filing, was already under active legal challenge.

That last point is the one with the most durable consequence for rate-review credibility. A regulator evaluating a 2027 filing submitted before July 16 has to decide whether to treat the original pool-morbidity assumption as a reasonable estimate made in good faith under then-current law, which most state rate-review standards would support, or to require a formal amendment reflecting the injunction, which several states' rate-review guidance now effectively demands given how directly the reconciliation cutoff bears on projected enrollment. Either path puts real weight on the actuarial memorandum's narrative section, not just its numeric exhibits, since the memorandum is where an actuary documents which enrollment-policy assumption a filing relied on and how confident that assumption was at the time. actuary.info's tracking of this rule's litigation history shows this is now the third distinct 2027 NBPP provision to face a court-driven repricing event within four months, following the CSR-loading documentation duty that survived the injunction and the risk-adjustment recalibration that did not face legal challenge but drew from pre-contraction claims data; a pattern of mid-cycle regulatory reversal is becoming as material to 2027 rate credibility as any single provision within it.

What a Mid-Filing Correction Actually Requires

For an actuary managing this correction, the practical sequence starts with isolating the pool-morbidity load specifically attributable to the one-year reconciliation cutoff, separate from trend, from the risk-adjustment recalibration, and from the CSR-loading documentation duty that survived the injunction intact, since regulators reviewing an amended filing will want to see that only the invalidated assumption changed. From there, the corrected load needs a defensible basis for the restored population's expected utilization, whether drawn from CMS's published FTR-sweep operational data or from an issuer's own encounter experience with enrollees it had begun flagging before the July 16 order. And because the fee-load relief and the morbidity correction move through the same rate build in opposite directions, the amendment needs to show both adjustments together rather than treating the reconciliation reversal as an isolated line item, since a regulator or competitor comparing the amended filing to the original will otherwise see two unexplained, offsetting movements rather than one coherent explanation of what changed and why.