2026 Federal Law to Limit Health Coverage for Lawfully Present Immigrants
The Budget Reconciliation Law, set to take significant effect by October 1, 2026, will restrict federally funded health coverage eligibility for lawfully present immigrants in the U.S. to a limited group including lawful permanent residents (LPRs), Cuban and Haitian entrants, and citizens under the Compact of Free Association (COFA). This change affects Medicaid, CHIP, the Marketplace, and Medicare, causing an estimated 1.4 million immigrants to potentially lose health coverage. States have some flexibility through options like the Immigrant Children’s Health Improvement Act (ICHIA) and From Conception to the End of Pregnancy (FCEP) programs to continue coverage for certain children and pregnant people using federal funds and state-only funds. However, adults who are lawfully residing but not pregnant typically lose federally funded coverage unless states opt to support them with state funds.
In Medicaid and CHIP, many states have already adopted ICHIA and FCEP options allowing continuity of coverage for some immigrant children and pregnant women past the federal cutoff. Yet, without these state measures, a significant number of lawfully present immigrants, including adults, will become uninsured. Approximately 15 states provide state-funded coverage to children regardless of immigration status, with fewer states offering similar coverage for adults. Many state programs have limitations based on age, income, or caps on the number of enrollees.
Marketplace coverage eligibility for premium tax credits and cost-sharing reductions will also narrow similarly from January 1, 2027. This will remove subsidized coverage access for a broader group of lawfully present immigrants, increasing the number of uninsured by an estimated 900,000. Additionally, a rule allowing certain low-income immigrants in a Medicaid waiting period to receive subsidized Marketplace coverage will end on January 1, 2026, potentially adding another 300,000 uninsured individuals.
Medicare eligibility restrictions took effect immediately for new enrollees and will phase out for current enrollees by January 4, 2027. These changes remove coverage for lawfully present noncitizens outside the specified groups, expanding the uninsured senior and disabled population by an estimated 100,000 individuals. Limited state-funded programs exist to support those losing Medicare coverage, but comprehensive coverage alternatives remain scarce.
The Congressional Budget Office (CBO) estimates the combined effect of these federal restrictions will increase the uninsured immigrant population by approximately 1.4 million, contingent on state-level policy responses. States with more inclusive state-funded programs may offset some impacts, but eligibility restrictions and funding gaps signal considerable shifts in coverage dynamics for lawfully present immigrants.
Insurers, providers, and policymakers in state governments will need to monitor these evolving federal and state interactions. System updates for enrollment and eligibility verification will be necessary to accommodate new federal funding rules and ensure compliance. The varying adoption of state options highlights a fragmented health coverage landscape for immigrant populations and emphasizes the strategic role of state-driven coverage solutions amid federal eligibility tightening.