The New York State Department of Health has announced new steps to maintain health care access for residents after federal funding was reduced by the budget bill H.R.1. The change in federal law eliminates $7.5 billion in annual funding for the state’s Essential Plan, which currently provides health coverage to nearly 1.7 million low- and middle-income New Yorkers.
As a result of these cuts, the state will end its Section 1332 State Innovation Waiver and expansion of the Essential Plan. Governor Kathy Hochul is proposing a return to the Basic Health Program, a move that is expected to allow about 1.3 million people to remain enrolled in affordable coverage.
State Health Commissioner Dr. James McDonald said, “I have been very direct and clear with New Yorkers about the disastrous impact of H.R.1 on our health care system, and the devastating choices it would force states to make. By reverting to a Basic Health Program, Governor Hochul is making sure that 1.3 million working people will be able to keep their affordable health insurance. Even with these steps, too many New Yorkers – nearly half a million– will lose affordable health coverage and be forced to choose between keeping food on the table and paying their medical bills. I am grateful to Governor Hochul for standing up and doing what’s right while Washington Republicans rip health care away from their constituents.”
According to state officials, an estimated 450,000 middle-class residents will lose access to zero-premium comprehensive insurance despite efforts at the state level.
The loss of federal support may also increase uncompensated care costs for healthcare providers across New York State, potentially affecting service delivery and leading some facilities to close. The broader economic impact could include job losses as less money circulates within communities.
Previously, New York’s Section 1332 waiver expanded eligibility for the Essential Plan up to 250% of the federal poverty level—about $39,125 per year for an individual—providing comprehensive insurance with no monthly premiums or deductibles and minimal cost-sharing.
NY State of Health Executive Director Danielle Holahan said, “The Essential Plan has been the linchpin to driving down New York’s uninsured rate among those who do not qualify for Medicaid but still struggle with health care costs. Many enrollees are essential workers, small business employees, and families working multiple jobs to make ends meet. Our decision to terminate the waiver allows us to preserve coverage for as many New Yorkers as possible and protect more than a decade of progress in expanding healthcare.”
State officials say they are committed to an orderly transition process while collaborating with federal agencies such as CMS on new coverage options for those affected by these changes. Impacted consumers will receive at least 90 days’ notice before any eligibility changes take effect and will have access to special enrollment periods along with enhanced customer service.
A public comment period on the plan runs from September 10 through October 10; details are available at https://info.nystateofhealth.ny.gov/1332.
If approved by CMS, the switch back to a Basic Health Program is expected by July 1, 2026.
