New Federal Law Cuts Medicaid and ACA Marketplace Coverage, Tightens Eligibility

The recently enacted federal legislation introduces significant reductions in Medicaid and ACA marketplace health insurance access for millions of Americans. This law implements approximately $1.1 trillion in cuts projected to result in 10 million people losing coverage by 2034, alongside the expiration of enhanced marketplace subsidies in 2025, which could affect an additional 4 million. It reshapes Medicaid eligibility by introducing work requirements starting in 2027 and increasing the frequency of eligibility reassessments from annually to every six months for certain low-income adults.

The legislation also imposes stricter conditions on ACA marketplace coverage, including barring federal tax credits for certain special enrollment period applicants starting in 2026 and excluding some lawfully present immigrants from subsidy eligibility. By 2028, it will prevent automatic re-enrollment into marketplace plans, requiring consumers to submit documentation for subsidy eligibility that was previously verified through third parties.

Supporters of the law argue it targets reducing improper payments and combatting fraud within federally funded health programs, citing CMS reports documenting extensive improper Medicaid payments and estimates of improper marketplace enrollments costing billions in federal funds. However, opponents argue that these measures create administrative barriers for beneficiaries instead of addressing provider-related fraud, and that the law unduly penalizes low-income and vulnerable populations.

Judicial decisions have temporarily stalled some CMS regulations designed to implement these provisions, signaling ongoing legal and political challenges. Additionally, legislative efforts are underway to extend marketplace subsidies temporarily, but political uncertainties including upcoming elections and recent government shutdowns may influence future amendments to these policies.

Overall, this legislation represents a significant shift in U.S. federal health policy by emphasizing program integrity and fiscal accountability, while raising concerns about coverage losses and access hurdles for Medicaid and ACA marketplace enrollees. Industry stakeholders, state governments, and policymakers are likely to navigate the balance between maintaining program sustainability and ensuring coverage accessibility in the evolving regulatory environment.