Republican State AGs Challenge CMS Rule Redefining 'Lawfully Present' for ACA Eligibility Under Administrative Procedure Act (APA)

At a Glance

• On August 8, 2024, thirteen Republican state attorneys general (AGs) sued the Centers for Medicare & Medicaid Services over a recent rule change that would expand Affordable Care Act (ACA or ObamaCare) coverage to recipients of the Consideration of Deferred Action for Childhood Arrivals (DACA) program, otherwise known as “DREAMers.”
• The rule would treat DACA recipients as “lawfully present” for purposes of ACA eligibility. The states argue the rule would violate the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which limits eligibility for federal public benefits to qualified noncitizens.
• The states further argue that they would be irreparably harmed not because the state itself would provide subsidized health care, as ACA subsidies are federally funded, but that access to the subsidized ACA markets would increase administrative costs for states that have their own ACA exchanges and encourage DACA recipients to remain in the plaintiff states who then must “expend additional education, healthcare, law enforcement, public assistance and other limited resources,” including public schooling, driver’s licenses, indigent legal defense, emergency care and incarceration costs.
• The upcoming U.S. presidential election will impact the types of lawsuits that get filed by state AGs against the federal government and which AGs bring those lawsuits. Here, Republican AGs are suing the Democratic administration over a rule that is sure to call attention to immigration issues.

On August 8, 2024, thirteen Republican state attorneys general brought suit in the District of North Dakota against the Centers for Medicare & Medicaid Services (CMS) to challenge the agency’s recent rule allowing consideration of Deferred Action for Childhood Arrivals (DACA) recipients — or “DREAMers” — to be considered “lawfully present” for purposes of Affordable Care Act (ACA or ObamaCare) eligibility. See Kansas et al. v. United States, et al., No. 1:24-cv-00150-DMT-CRH (D.N.D. filed Aug. 8, 2024).The plaintiffs argue that CMS’s new definition violates the Administrative Procedure Act (APA) by conflicting with existing federal law and overstepping CMS’s statutory authority. The lawsuit underscores how the upcoming presidential election will impact the types of lawsuits that get filed by state AGs against the federal government and which AGs bring those lawsuits. In this instance, Republican AGs are suing the Democratic administration over a rule that will likely draw attention to immigration issues.

The plaintiffs’ central contention is that the CMS rule is inconsistent with the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which restricts federal public benefits to “qualified aliens” such as lawful permanent residents and refugees. DACA recipients, by contrast, are not included in this definition and are, by the plaintiffs’ interpretation, unlawfully present in the United States. The complaint emphasizes that the ACA also limits eligibility for its benefits to U.S. citizens and those lawfully present, excluding DACA recipients.

CMS’s rule change redefines “lawfully present” to encompass DACA recipients and other noncitizens who have been approved for work authorization under specific regulations. The plaintiffs argue this is both “contrary to law” and “arbitrary and capricious” under the APA. They assert that the final rule is an unlawful attempt by CMS to extend ACA benefits beyond the scope permitted by Congress, effectively granting benefits to individuals who are not legally eligible.

The plaintiffs allege irreparable harm due to the anticipated fiscal impacts on the states, arguing that expanding ACA eligibility to DACA recipients will lead to increased administrative health care costs for the states that run their own ACA exchanges and strain on other state resources. The plaintiffs contend that these costs arise from an expected increase in the use of state-run ACA exchanges and associated subsidies, which are federally funded. They argue that this rule incentivizes DACA recipients to remain in the U.S. and may encourage additional illegal immigration, further exacerbating fiscal burdens on the states, such as public schooling, driver’s licenses, indigent legal defense, emergency care and incarceration for illegal immigrants.

The plaintiffs also argue that CMS’s justification for the rule change lacks sufficient explanation and fails to consider the reliance interests of states that have established health care exchanges under the previous regulatory framework. They claim that CMS has not adequately addressed the states’ reliance on previous definitions of “lawfully present,” which excluded DACA recipients and a broad group of noncitizens authorized to work, nor the potential costs to the states of expanding ACA eligibility.

In seeking judicial relief, the plaintiffs request the court to vacate the CMS rule and prevent its implementation, arguing that it is not only unlawful but also imposes unjustified economic burdens on states. They also seek a postponement of the rule’s effective date pending judicial review and request reimbursement for costs and attorney’s fees.