Medicaid Impacts Under the One Big Beautiful Bill

One Year In; One Big Beautiful Bill (OBBB) Medicaid Reforms Arriving

A year after it became law, one of the OBBB’s biggest pieces is moving from paper to practice. Signed into law on July 4, 2025, the OBBB established work requirements for adults ages 19 to 64 in states that expanded Medicaid under the Affordable Care Act. The requirements reach 43 states and the District of Columbia and are projected to apply to 18.5 million enrollees. To keep coverage, affected individuals must complete 80 hours of work or qualifying activities each month, enroll at least half-time in an education program, meet a set income threshold, with compliance verified every six months. States must have these programs running no later than January 1, 2027.

On June 1, 2026, the Centers for Medicare & Medicaid Services (CMS) published an interim final rule on how states must run these requirements, and one provision stands out for employers. The rule narrowed the “medically frail” exemption. Individuals must now not only have a qualifying medical condition but also demonstrate that the condition significantly limits their ability to satisfy the work requirements to qualify for an exemption. CMS estimates that roughly 15% of Medicaid enrollees subject to the new requirements could lose coverage.

OBBB does not directly change employer-sponsored group health plan requirements. Employees who lose Medicaid eligibility may seek coverage through their employer’s health plan, increasing enrollment and mid-year special enrollment requests. Here is the part worth flagging for HR: losing Medicaid eligibility is a HIPAA special enrollment event. An employee who loses Medicaid has 60 days to request enrollment in the employer’s plan, twice the usual 30-day window. Employers should confirm that their enrollment process, onboarding materials, and plan documents account for these requests.

CMS Administrator Mehmet Oz said, “We hope by guiding able-bodied individuals in this initiative, we aim to support their path to independence, but hopefully they don’t need to depend on Medicaid, and are supported by employer-sponsored health plans that would free up critical space in the program for our most vulnerable population to receive the care they deserve.”

As the phased in implementation rolls out across the country, employers should be aware of the potential need for mid-year enrollment, field employee questions, and monitor potential downstream cost impacts. Your Heffernan account team is always available to assist.
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Sara Galeb-Roskopp, UC LAW SF, Class of 2028