By 2034, OBBBA is projected to reduce federal Medicaid funding by $911 billion and decrease Medicaid enrollment by 10.3 million people.^1,2

Several provisions drive these federal savings:²

• The bill requires 21 million Medicaid expansion enrollees to meet 80 hours per month of work and reporting requirements to retain coverage, generating $326 billion in projected savings.
• It blocks provider tax increases in non-expansion states and reduces existing taxes in expansion states, saving $191 billion.
• Updates to the cap on state-directed payments are projected to save $149 billion.
• OBBBA rolls back Biden-era rules that simplified Medicaid eligibility and renewal, contributing $122 billion in savings.
• It increases the frequency of eligibility redeterminations for the ACA expansion group, generating $63 billion in savings.

In addition to the major provisions above, OBBBA includes several policies that further restrict eligibility, complicate enrollment, and reduce federal and state Medicaid spending:

• Eligibility restrictions: The bill eliminates federal funding for individuals without qualified immigration status and explicitly excludes undocumented immigrants from Medicaid eligibility.
• Enrollment barriers: States must verify enrollment using only reliable data sources, shorten retroactive coverage to one month, and impose cost sharing of up to $35 per service for some enrollees based on income.
• Spending reductions: Section 1115 demonstration waivers must now be budget neutral, and OBBBA removes the financial incentive from the American Rescue Plan Act for states to expand Medicaid eligibility.

Decreased membership

OBBBA’s Medicaid provisions are expected to significantly reduce enrollment, particularly among healthier individuals. With approximately 75% of Medicaid beneficiaries — around 72 million people — enrolled in managed care organizations (MCOs), any drop in membership directly impacts plan revenue.³ Work and reporting requirements are likely to drive much of this disenrollment, especially in expansion states where 21 million enrollees could be subject to these new conditions.⁴ This could lead to higher per-member costs for plans, as those at risk of disenrollment from work requirements tend to be lower-cost than the average enrollee.⁵

Worsening member health

Plans are likely to see increased churn as members lose and regain eligibility through administrative issues and work status changes, which will impact care continuity and quality. Members who lose coverage could have worsened health outcomes, potentially increasing care costs when they reenroll.⁶

At the same time, states facing budget shortfalls may cut optional Medicaid services such as behavioral health, dental care, and postpartum coverage — services that are often critical to member well-being and cost management. These challenges are compounded by broader social policy changes, such as cuts to the Supplemental Nutrition Assistance Program (SNAP), which could worsen food insecurity and increase healthcare costs.⁷ In aggregate, these shifts could lead to smaller risk pools, lower care quality, and increased financial pressure on plans.

Increased complexity for plans

OBBBA will create a more fragmented and demanding operational environment for Medicaid plans. States are expected to adopt varying rules and timelines, requiring plans to expand regulatory teams and further develop state-specific expertise. Budget constraints may also increase scrutiny on fraud, waste, and abuse. To adapt, plans will need to invest in interoperable systems, enhance provider-facing technologies, and strengthen compliance teams.

Increased complexity for members

New eligibility rules, work requirements, and cost-sharing obligations will create additional barriers to enrollment and retention. To mitigate these effects, plans should invest in member support infrastructure — retraining staff, launching targeted outreach, and enhancing digital tools for enrollment and verification. Plans may be able to apply some of the skills they developed during the redeterminations after the public health emergency, as outlined in our earlier article on the Medicaid unwinding.

Medicare Advantage plans will be impacted as D-SNPs are the largest SNP product and growing faster than conventional MA plans. While D-SNPs were not specifically called out in OBBBA, there will be implications for them. For example, optional benefits like Home and Community-Based Services (HCBS) may be minimized because of funding cuts, and these disproportionately serve dual-eligible members.⁸

Commercial plans are also likely to face pressure as health systems seek higher reimbursement rates to offset losses from uncompensated care and reduced Medicaid revenue. Depending on how plan-provider rate negotiations unfold, employers may have to increase employee premiums or narrow networks to offset these cost increases. Contrary to what some may believe, work requirements are unlikely to increase employment or commercial insurance uptake, as history shows no significant employment gains from such policies.⁹

In this section, we are including not only changes from OBBBA but also changes from the ACA final rule that were originally in OBBBA but eventually released on June 20.¹⁰ These changes to the ACA Marketplace could increase the number of uninsured Americans by 8.2 million by 2034 — made up of 3.1 million from ACA-specific provisions, 900,000 from codified Marketplace rules, and 4.2 million from the expiration of enhanced premium tax credits.¹ HHS proposes that the ACA final rule will cut $12 billion in spending in 2026 alone.¹¹

The key ACA-related changes include:

Enrollment

• Reduced enrollment time and eligibility groups: The rule eliminates year-round enrollment for low-income individuals and narrows eligibility for special enrollment periods (SEPs), reducing flexibility for those experiencing life changes. Also, the open enrollment period is shortened, and Deferred Action for Childhood Arrivals (DACA) recipients are explicitly excluded from Marketplace eligibility — reversing recent efforts to expand access.

Premium tax credits

• Fewer people eligible for premium tax credits: Certain immigrant populations will see reduced eligibility, and individuals who enroll during non–qualifying life event (QLE) SEPs will no longer be eligible for premium tax credits or cost-sharing reduction (CSRs). Perhaps most consequentially, individuals who are denied Medicaid due to new work requirements will also be barred from receiving subsidized ACA coverage.
• More hurdles to receive premium tax credits: The rule introduces pre-enrollment verification requirements and eliminates self-attestation for family size and other personal details. It also ends automatic reenrollment for individuals eligible for zero-premium CSR plans.

Product design

• Greater cost sharing and consumer responsibility: Enrollees must pay premiums in full to retain coverage. Also, the bill widens allowable actuarial value variation and reverts the premium adjustment percentage (PAP) to 2019 levels, potentially increasing consumer cost sharing.
• Reduced covered benefits: Gender-affirming care is no longer considered an essential health benefit. CSRs cannot be used for plans that include abortion coverage.

Reduced enrollment with increased churn

The combined impact of OBBBA’s ACA-related provisions, alongside Medicaid changes and the expiration of enhanced subsidies, is projected to significantly reduce enrollment and increase churn in the individual market. The enrollment hurdles may discourage enrollment among workers with variable income, such as freelancers and seasonal employees, and lead to more frequent gaps in coverage. As the risk pool shrinks, plans will have to increase premiums and adopt cost-saving measures such as narrowing networks, which would further shrink the risk pool. Plans are already requesting a median premium increase of 15% for 2026.¹³

Greater cost sharing and consumerism

From the actuarial value and PAP changes mentioned above, member premiums and out-of-pocket maximums will increase by hundreds of dollars depending on the member’s income and product.¹⁴ Health plans will need to invest in more member education on consumerism, improve member support for navigating subsidy eligibility, and update communications to reflect new benefit structures.

For Medicaid, individuals who are denied Medicaid due to work requirements will also be barred from accessing subsidized coverage through the ACA Marketplace. For employer-sponsored insurance, OBBBA codifies existing rules for ICHRAs and introduces a new small-business tax credit to support CHOICE arrangements. Also, the PAP methodology change increases out-of-pocket maximums for group plans to $10,600 for individual coverage and $21,200 for family coverage.¹⁸