CMS Proposes Rule Restricting State Directed Payments
On May 20, CMS released for public inspection a proposed rule implementing Section 71116 of H.R. 1, which requires CMS to limit the total payment rate for state directed payments (SDPs). The proposed rule places additional restrictions on states’ use of SDPs, both in lowering the overall payment limit and in limiting the types of arrangements states may include in their program design. The rule also places additional restrictions on targeted fee-for-service payments. The rule will be officially published in the Federal Register on May 22, and CMS will accept public comment through July 21, 2026.
Sellers Dorsey summarized the proposed rule, with a full summary available here. (CMS, May 20; Federal Register, May 20).
CMS Announces New Prior Authorization Coalition
On May 13, CMS Administrator Mehmet Oz unveiled the agency’s Electronic Prior Authorization Acceleration initiative, which brings together 29 companies across the healthcare sector into a coalition to implement the agency’s prior authorization regulations to streamline processes. Companies that have pledged to join include health systems, electronic health record (EHR) vendors, data exchange networks, and payers. The pledge is part of the agency’s larger Health Tech Ecosystem initiative, which they launched last summer, to modernize the US healthcare system through improvements in digital health and interoperability frameworks, and to increase patient access. Through this pledge, the coalition hopes to implement the Biden Administration’s CMS-0057 prior authorization standards. (Healthcare Dive, May 14; Inside Health Policy, May 15).
CMCS Director Calls for Standardized Medicaid Quality Measures, Pushing Uniformity
On May 13, at the Duke Margolis Institute for Health Policy’s annual conference, CMCS Director Daniel Brillman argued that state Medicaid programs are oversaturated with Medicaid quality metrics, with one state tracking as many as 4,000 measures currently. Brillman notes that many standards prioritize measuring activities, rather than outcomes-driven payments. In his statement, he called for reforms to the current system and for his agency to streamline Medicaid program design and operations (Inside Health Policy, May 18).
CMS Finalizes 2027 Payment Notice Rule for ACA Marketplace
On May 15, CMS finalized the “HHS Notice of Benefit and Payment Parameters for 2027; Basic Health Program” (2027 Payment Notice) rule. The final rule will go into effect July 20, 2026, and will make changes to the ACA Marketplace with the intention of increasing regulatory oversight, expanding available plan types, and lowering healthcare costs. Proposals finalized include several requirements intended to bolster program integrity, such as new restrictions on marketing practices, the creation of standard eligibility application review and consumer consent forms, and the implementation of the State Exchange Improper Payment Measurement (SEIPM) program.
CMS also finalized several changes to the types of plans available on the ACA Marketplace. Now, multi-year catastrophic plans will be available, up to 10 years and non-network plans. Moreover, CMS has finalized changes to standardized plan options. Federally facilitated exchanges (FFE) and state-based exchanges that are federally platformed (SBE-FP) will no longer be required to offer standardized plans in the individual market, nor limit the number of non-standardized plan options offered. Within plan offerings, issuers will be prohibited from including adult dental services as an essential health benefit (EHB) and any state-required benefits in addition to the EHB will be the responsibility of the state to pay.
The agency has also finalized additional policies to verify consumer income eligibility for advanced premium tax credits and align with changes in H.R. 1 that limit eligibility for immigrants without legal status. Most provisions in the final rule are effective July 20, 2026, or at the beginning of Plan Year 2027. A smaller number of provisions will go into effect for PY2028, including the defrayal of costs for state-required benefits, amending exchange network adequacy standards for non-network plans in FFE states, and changes to the ECP program for non-network plans (CMS Newsroom, May 15).
ACA Enrollment Drops as Higher Premiums Drive Coverage Losses
ACA marketplace enrollment is falling sharply in 2026 as consumers face higher premium costs following the expiration of enhanced pandemic-era subsidies at the end of 2025. Internal CMS data obtained by NOTUS found that about 21% of enrollees in the 30 states using HealthCare.gov were disenrolled for failing to pay premiums, up from 12% during the same period last year. Nationally, enrollment declined about 17%, while state-based marketplaces saw smaller losses after some states used their own funding to offset expiring federal subsidies. Total ACA enrollment has fallen to roughly 19 million people, down about 3 million from last year’s open enrollment totals, though still above pre-pandemic levels.
Premium increases were also substantial, with the average monthly cost of a silver plan for a 40-year-old rising from $497 to $644 year over year. Reports from Wakely Consulting and the State Marketplace Network projected continued enrollment declines throughout the year and found that many consumers shifted from silver plans to lower-cost bronze coverage. Major insurers including Centene, Oscar Health, Molina Healthcare, and the Blue Cross Blue Shield Association reported higher attrition tied largely to unpaid premiums, while Cigna announced plans to exit the marketplaces next year. CMS leadership under Administrator Mehmet Oz has emphasized fraud reduction efforts, though insurers and policy experts said affordability pressures and automatic reenrollment into higher-cost plans appear to be the primary drivers of coverage losses (Inside Health Policy, May 14; Notus, May 12).
GAO Ruling Opens New Congressional Path to Challenge CMS WISeR Model
CMS’ WISeR model is drawing increased attention from lawmakers and advocacy groups over its expansion of prior authorization and use of technology in traditional Medicare. A recent Government Accountability Office (GAO) decision determined the model qualifies as a rule under the Congressional Review Act, giving Congress a potential pathway to overturn the initiative through a joint resolution. As debate around the model continues, CMS Administrator Mehmet Oz defended the initiative in a letter to Representative Suzan DelBene, describing it as a targeted effort focused on services considered vulnerable to inappropriate use and emphasizing that licensed clinicians, not AI systems, make non-affirmation determinations. Oz also said CMS plans to audit contractor decisions, apply penalties for inaccurate determinations, and introduce gold card exemptions for providers with strong approval records. The six-year pilot currently operates in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. Congressional pressure has already contributed to CMS delaying implementation for certain Parkinson’s disease and spinal stenosis procedures, while the Electronic Frontier Foundation filed suit against CMS over concerns related to algorithm transparency and potential bias (Inside Health Policy, May 15).
