Maryland AG Joins Multi-State Effort to Challenge Federal Rule Impacting Medicaid and Health Insurance

Maryland Attorney General Anthony G. Brown is leading a coalition of 24 states in opposing a proposed federal rule from the Centers for Medicare & Medicaid Services (CMS). The coalition contends that the rule exceeds federal authority and could jeopardize funding for the Medicaid program, while also interfering with states’ ability to regulate the health insurance market and manage their own health insurance exchanges. The attorneys general submitted a formal comment letter to CMS outlining their objections, arguing that the agency is attempting to unilaterally alter established regulations in a manner not permitted by Congress.

The core of the dispute lies in how the proposed federal rule would redefine the treatment of certain taxes, fees, and other payments collected by states. CMS has stated that the rule is intended to ensure states contribute their fair share to the costs of Medicaid, a program jointly funded by federal and state governments that provides health coverage to low-income individuals and families. However, the coalition argues that the proposed changes extend beyond this stated purpose, impacting a broader range of state taxes and payments that are unrelated to Medicaid. This, they claim, represents an improper encroachment on states’ authority to regulate their health insurance markets and oversee health insurance exchanges, which are crucial for providing accessible health coverage to residents.

The coalition’s comment letter highlights four primary concerns regarding the proposed CMS rule. Firstly, the attorneys general assert that the rule would improperly interfere with state regulation of health insurers by penalizing states for imposing taxes and fees on these companies. This penalty would manifest as a reduction in federal Medicaid funding, a move the coalition views as a violation of existing law and a threat to state Medicaid programs. Secondly, the letter addresses the improper application of new limitations on the collection of taxes and payments from health insurers. A federal law enacted in 2025 introduced new restrictions on certain state-level collections, but the coalition argues that CMS is incorrectly applying these limitations to health insurer taxes and payments, a step that is neither mandated nor authorized by the 2025 legislation.

A third significant concern raised by the coalition is the proposed elimination of a long-standing regulatory safeguard. CMS is seeking to alter the criteria used to determine when state taxes and payments will result in reduced federal Medicaid contributions. The coalition points out that some of these criteria are explicitly defined in federal law and are therefore beyond the scope of CMS’s authority to change. Finally, the proposed rule could impose substantial administrative burdens on states, requiring them to reconstruct financial records dating back to mid-2025 and develop entirely new reporting systems. This “paperwork” burden, the coalition argues, adds unnecessary costs and complexity for states already managing strained budgets and health coverage programs. The attorneys general collectively expressed that states are facing significant financial pressures in providing health coverage, and this federal rule introduces additional federal overreach and administrative hurdles without adequate legal justification. They warn that if enacted as proposed, the rule could significantly strain state budgets, jeopardize funding for essential Medicaid services, and disrupt the functioning of state-based insurance oversight and Affordable Care Act health exchanges, all of which are vital for ensuring residents maintain health insurance.

The coalition is advocating for CMS to withdraw the proposed rule or, at a minimum, to make substantial revisions to address their concerns. The states joining Maryland and Colorado in submitting the comment letter include Arizona, California, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.

Article by Mel Anara, based upon information from the Maryland Attorney General’s Office.

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