States Sue to Block HHS Rule Cutting Health Coverage; ICE Use of Medicaid Data Sparks Outcry

Twenty Democratic Attorneys General and Pennsylvania Governor Josh Shapiro sued the U.S. Department of Health and Human Services (HHS) on Thursday, seeking to block parts of a federal rule they say could cut health coverage for up to 1.8 million people. 

Filed in Massachusetts federal court, the lawsuit targets new restrictions on Affordable Care Act (ACA) marketplace enrollment, including shorter signup windows, new fees, and the exclusion of transgender care from mandatory coverage, Reuters reported.

The plaintiffs argue the rule is illegal, costly, and burdens states with higher premiums and red tape.

New Jersey Attorney General (AG) Matthew Platkin accused the Trump administration of sowing “confusion and chaos” ahead of the 2026 open enrollment period. 

HHS defended the rule, stating that it tightens oversight and ensures subsidies are only awarded to eligible recipients.

Separately, HHS confirmed that it is sharing the personal data of 79 million Medicaid enrollees with U.S. Immigration and Customs Enforcement (ICE) to help identify undocumented immigrants who are receiving benefits. 

The data includes addresses and ethnicities, according to a report by the Associated Press (AP). 

HHS stated that the move is legal and aimed at curbing fraud, but it has raised privacy concerns under the Health Insurance Portability and Accountability Act (HIPAA).

The crackdown comes as major health insurers slash forecasts. Elevance Health (ELV) cut its profit outlook Thursday, citing ACA and Medicaid pressures. 

UnitedHealth Group (UNH), Centene Corporation (CNC), and Molina Healthcare (MOH) have also warned of rising costs and shrinking margins. 

Collectively, the four firms have lost over $300 billion in market value since April, as Washington reverses decades of steady public funding and signals more cuts ahead, Bloomberg reported.

On Stocktwits, retail sentiment was ‘extremely bullish’ for ELV and UNH, with message volume rated ‘extremely high’ and ‘high’ respectively. 

Meanwhile, sentiment for CNC was ‘bullish’ with ‘high’ message volume, while Molina MOH saw ‘neutral’ sentiment amid similarly ‘high’ message volume.

So far this year, CNC is down 51.8%, UNH is down 42.9%, MOH is down 28.9%, and ELV is down 17.3%.

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