Five Things to Know About HR 1

HR 1 introduces new administrative burdens for enrollees, particularly in Medicaid and the marketplaces, which are likely to increase churn and adverse selection. Enrollees must complete more extensive and complex paperwork, which may lead to gaps in coverage and delayed care.

Approximately 71 million individuals are currently enrolled in Medicaid, including 40% of children in the US. Federal estimates project that 10 million individuals will lose coverage under HR 1, with more than 90% of those losses affecting people who remain eligible for benefits.

Coverage losses will result primarily from new documentation requirements, including mandatory employment verification at least twice annually. States may implement even more frequent redeterminations. Enrollee confusion and communication challenges (eg, changes in address or phone number) will likely contribute to unnecessary disenrollment. Notably, MCOs are prohibited from participating in the employment verification process, creating delays in enrollment updates.

In the health insurance marketplaces, which currently serve more than 24 million enrollees, 7 million individuals are projected to lose coverage.¹ Contributing changes include shortened open enrollment periods, reduced eligibility for advance premium tax credits, and the de facto elimination of automatic re-enrollment, replaced by a manual verification process.² These changes, coupled with the expiration of COVID-era subsidies, are expected to lead to higher premiums and increased risk segmentation, as healthier individuals forgo coverage.

HR 1 introduces significant changes to Medicaid financing, particularly in provider tax limits and state-directed payments (SDPs).

For expansion states, the maximum allowable provider tax rate will decrease by 0.5 percentage points annually (from the current rate of 6%) until it reaches 3.5% in 2031. Non-expansion states will have their provider tax rates frozen. In addition, SDPs, which have typically been benchmarked to commercial rates, must now align with Medicare rates—100% for expansion states and 110% for non-expansion states.² These policies are projected to reduce federal Medicaid spending by $370 billion over 10 years.⁴

As a result, states will have to make tough budget choices. Currently, 41 states contract with MCOs to provide comprehensive managed care. MCOs in those states will likely see lower capitation rates and reductions in SDP-based payments. Some states may even opt to exit managed care and return to fee-for-service models to retain control over supplemental payments.

Insurance coverage loss does not eliminate medical need. Patients without coverage still require care, particularly emergency services. Insured patients benefit from preventive care, which reduces hospitalizations. Uninsured patients often present with more advanced diseases or emergent needs.

Historically, uncompensated care has been supported by public subsidies or charitable programs. With federal reductions in Medicaid and exchange subsidies, this financial buffer will shrink. If charitable sources cannot compensate, hospitals may shift costs to privately insured patients, increasing premiums and fees. While taxpayers may spend less on Medicaid, privately insured individuals could absorb these costs indirectly.

Although HR 1 does not repeal the Affordable Care Act (ACA), it significantly undermines core provisions, especially for states that expanded Medicaid.

Key provisions include⁵:

• Repeal of the enhanced Federal Medical Assistance Percentage (FMAP) for expansion populations as of January 1, 2026 (originally established under the American Rescue Plan Act);
• New cost-sharing requirements for expansion enrollees;
• Reduction of retroactive coverage to 1 month for expansion enrollees (2 months for non-expansion);
• Semiannual eligibility redeterminations for expansion enrollees, in addition to employment verification.

Some states have statutory triggers to repeal Medicaid expansion if the FMAP falls below specified thresholds. These changes may render Medicaid expansion financially unsustainable for some jurisdictions.

Despite its breadth, HR 1 did not address several high-priority issues, such as pharmacy benefit manager (PBM) reform. Proposals regarding spread pricing, transparency, and administrative fees remain under consideration. The 340B drug pricing program is also expected to receive further legislative scrutiny. While it is unclear how quickly lawmakers will coalesce around additional reform proposals, we should expect more legislation affecting managed care this year.

Public opinion may influence future changes. Democrats have indicated plans to campaign against it during the 2026 midterm elections. Some Republican lawmakers have already expressed regret over their votes, citing political pressure. For example, Senator Josh Hawley of Missouri, who voted in favor of HR 1, introduced legislation to reverse its changes to provider taxes and SDPs.⁶

What does this mean for health care policy between now and November 2026? Some may want to attempt to repeal more controversial parts of HR 1 now that public attention has shifted. Alternatively, others may pursue health care legislation with more bipartisan support, such as PBM reform. The outlook for health care policy remains uncertain and will hinge on future political negotiations and public sentiment.   

1. Congressional Budget Office. Estimated effects on the number of uninsured people in 2034 resulting from policies incorporated within CBO’s baseline projections and H.R. 1, the One Big Beautiful Bill Act. Washington, DC: US Congress. Published June 4, 2025. Accessed August 25, 2025. https://www.cbo.gov/system/files/2025-06/Wyden-Pallone-Neal_Letter_6-4-25.pdf
2. American Hospital Association. Fact sheet: One Big Beautiful Bill Act would significantly reduce availability of coverage in the health insurance marketplaces. AHA. Published June 2025. Accessed August 28, 2025. https://www.aha.org/fact-sheets/2025-06-05-fact-sheet-one-big-beautiful-bill-act-would-significantly-reduce-availability-coverage-health-insurance
3. King & Spalding. Senate finance committee releases budget bill with more aggressive Medicaid provider changes than house version. JDSUPRA. Published July 3, 2025. Accessed August 28, 2025. https://www.jdsupra.com/legalnews/senate-finance-committee-releases-8477704/
4. Congressional Budget Office. Estimated budgetary effects of an amendment in the nature of a substitute to H.R. 1, the One Big Beautiful Bill Act, relative to CBO's January 2025 baseline. CBO. Published June 29, 2025. Accessed August 28, 2025. https://www.cbo.gov/publication/61534
5. KFF. Health provisions in the 2025 Federal Budget Reconciliation Law. Published August 22, 2025. Accessed August 28, 2025. https://www.kff.org/medicaid/health-provisions-in-the-2025-federal-budget-reconciliation-law/
6. Benen S. GOP’s Josh Hawley pushes to undo the Medicaid cuts he just voted for. MSNBC. Published July 16, 2025. Accessed August 25, 2025. https://www.msnbc.com/rachel-maddow-show/maddowblog/gops-josh-hawley-pushes-undo-medicaid-cuts-just-voted-rcna219053 

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