FILE PHOTO: A person walks outside of the U.S. Department of Health and Human Services building in Washington, D.C., U.S., March 27, 2025. REUTERS/Leah Millis/File Photo

(Reuters) -A federal judge paused portions of the U.S. Department of Health and Human Services' planned regulatory changes to the Affordable Care Act's health insurance marketplace on Friday, just days before they were due to take effect.

U.S. District Judge Brendan Hurson in Baltimore in his ruling sided with a challenge brought by the city of Chicago, the mayor and city council of Baltimore and public health advocates. They said the changes would result in more than 2 million people losing their health insurance coverage by increasing fees and imposing other barriers.

Hurson paused implementation of nearly all the provisions of the Marketplace Integrity and Affordability Rule the cities challenged until he can issue a final ruling in the case. The provisions paused include some of the added fees and extra scrutiny on low-income enrollees seeking insurance. Implementation had been scheduled for August 25.

The rule, finalized by HHS's Centers for Medicare & Medicaid Services in June, includes provisions meant to limit improper enrollments and the improper flow of federal funds, according to CMS.

The Affordable Care Act, the signature piece of domestic legislation under Democratic President Barack Obama, created the health insurance marketplaces, which are run by health insurance companies such as UnitedHealth Group and CVS's Aetna and provide income-based subsidies. In 2024 enrollment reached a high of 20.8 million people.

President Donald Trump in his first term in the White House had made a failed attempt to repeal Obamacare.

In Friday’s ruling, Hurson said in part that the states had put forward enough evidence that some of the rule's provisions run afoul of the ACA, commonly referred to as Obamacare.

Chicago Mayor Brandon Johnson praised the ruling, saying in a statement that it will “help our residents obtain reasonably priced health insurance and reduce the burden on our health clinics to provide free care.”

Representatives for HHS did not immediately respond to a request for comment.

Shares of health insurers rose in afternoon trade, with Centene up 2.25%, Elevance up 2.5%, Cigna up 2.3%, Molina up 2% and UnitedHealth up 1.3%.

Health insurers have been struggling with rising medical costs in their ACA plans in recent months, in part due to some members increasing their use of services in anticipation of dropping out of coverage in 2026.

The cities sued over the rule on July 1, saying it conflicted with the Affordable Care Act and was improperly enacted.

A group of Democratic attorneys general have separately sued to block parts of the rule. That lawsuit is still pending.

For next year, insurers are requesting the biggest premium increases for Obamacare plans since 2018 in anticipation of a smaller, sicker pool of enrollees, according to an analysis by health-research firm KFF.

(Reporting by Diana Jones, additional reporting by Sriparna Roy in Bengaluru; editing by Caroline Humer, Franklin Paul and Leslie Adler)