A federal appeals court handed California a significant legal defeat, striking down the core provisions of a state law targeting dialysis industry profits in a case that’s been grinding through the courts since 2019.
The 9th U.S. Circuit Court of Appeals ruled that central sections of Assembly Bill 290 are unconstitutional. Gov. Gavin Newsom signed AB 290 into law in 2019, but the measure never took effect. DaVita Inc. and Fresenius Medical Care, two of the country’s largest dialysis chains, sued almost immediately after passage. They were joined by the American Kidney Fund and a coalition of patients, keeping the law frozen in litigation for years.
The law’s core argument was this: Insurers, unions, and consumer advocates had long accused DaVita and Fresenius of donating to the American Kidney Fund, a nonprofit that covers insurance premiums for roughly 3,000 dialysis patients in California, as a way of steering those patients away from Medicare and Medicaid and onto private insurance plans. The motive isn’t complicated. Individual marketplace plans pay approximately three times what Medicare pays for dialysis treatment, according to a 2021 study out of the University of Southern California. The American Kidney Fund has denied those accusations consistently and directly.
AB 290 went after that alleged arrangement in two ways. First, it capped what dialysis providers could collect from private insurers for patients receiving nonprofit premium assistance, tying that cap to Medicare reimbursement rates. Second, it required charitable organizations to disclose patient names to insurers so those insurers could identify which patients fell under the cap. The 9th Circuit found both provisions unconstitutional.
The underlying cost problem isn’t abstract. About 800,000 Americans are living with end stage renal disease, a condition that requires blood-filtering treatment lasting up to five hours, several sessions per week. About 80% of those patients are enrolled in Medicare. But the smaller share who end up on private insurance are extraordinarily expensive to cover. Their average monthly costs run 33 times higher than other enrollees on the individual market, which drives premiums up across those plans for everyone else.
“The issue is that dialysis care is just significantly more expensive in the individual market, and it has to do with how consolidated the market has been allowed to become,” said Dr. Eugene Lin, assistant professor of medicine at USC and co-author of the 2021 study.
That consolidation is the backdrop for why California’s law mattered beyond state lines. DaVita and Fresenius dominate the U.S. dialysis market, and the two companies have beaten back state-level cost controls repeatedly since 2019. AB 290 was among the most direct attempts yet to use reimbursement caps to disrupt what critics described as a profit-maximizing cycle: company donations fund patient premiums, patients land on private insurance, and providers collect rates that dwarf what public programs pay.
The scale of the market explains why the legal fight was worth waging for years. Dialysis is a $12.8 billion industry in California alone. With that kind of revenue at stake, it’s no surprise the companies’ legal challenge outlasted multiple legislative sessions and didn’t reach a 9th Circuit ruling until 2024 and beyond.
What’s left for California now isn’t obvious. The court’s ruling doesn’t address the underlying market dynamics that produced the law in the first place, and those dynamics haven’t changed. Patients on private plans still cost 33 times more than typical enrollees. Fresenius and DaVita still control the market. The American Kidney Fund still operates its premium assistance program. The state legislature has tried since 2021 to crack the dialysis industry’s pricing power through multiple vehicles, with limited success.
Whether Sacramento tries again in 2026 with different legal architecture, or whether advocates push a ballot measure route, remains an open question. What the 9th Circuit ruling closes off is the specific approach AB 290 took. Reimbursement caps tied to Medicare rates, applied to nonprofit-assisted patients, don’t survive constitutional review, at least not as written. That’s the legal reality California’s health policy community is working with now.