Nearly half a million moderate-income New Yorkers began losing health insurance on July 1, the first major wave of coverage losses tied to the Republican tax and spending law enacted last year. Days earlier, 25 states and the District of Columbia sued the Trump administration over new Medicaid work rules that could strip coverage from eligible people who cannot navigate new paperwork requirements.
Together, the two developments show how the health care cuts are moving from Washington policy fights into clinics, enrollment offices, and household budgets.
The lawsuit, filed June 29 in federal court in Boston, challenges an interim final rule from the Centers for Medicare & Medicaid Services implementing Medicaid work requirements under President Donald Trump’s One Big Beautiful Bill Act. The rule requires many adults ages 19 to 64 to complete at least 80 hours a month of work, community engagement, or qualifying activities, or to be enrolled in school at least half time, to maintain Medicaid coverage.
The plaintiff states argue that the administration went beyond the law by narrowing protections for people who are medically frail or have special medical needs. Under the CMS rule, a person with a significant medical condition must show that the condition “significantly impairs” their ability to work, volunteer, or attend school at the required level.
That change, states argue, could force people with disabilities, serious mental health conditions, substance use disorders, cancer, or other complex medical needs into a confusing verification system just to keep health care they are legally entitled to receive.
“The Trump Administration’s attempt to impose new, burdensome requirements on Medicaid recipients threatens access to healthcare for our most vulnerable residents and families,” Massachusetts Attorney General Andrea Joy Campbell said in a statement.
CMS did not respond to Reuters’ request for comment on the lawsuit. The Trump administration has defended the new requirements as a way to prevent misuse of Medicaid and preserve benefits for those it says need them most.
The work requirement takes effect January 1, 2027, but states must notify Medicaid recipients of the changes by August 31, 2026. The suing states say that timeline gives them too little time to rebuild eligibility systems, train staff, notify enrollees, and determine who qualifies for exemptions.
CMS says states must verify compliance at application, renewal, and, if a state chooses, more frequent intervals. If a state cannot verify that someone has met the requirement, it must send a noncompliance notice and give that person 30 calendar days to prove compliance or show that the requirement does not apply. If the person fails to do so, their application could be denied or their Medicaid coverage could be terminated.
That structure is why health policy experts and state officials warn that coverage losses may hit people who are eligible, not only people who fail to meet the work requirement. For low-income people with unstable jobs, limited internet access, untreated illness, caregiving responsibilities, language barriers, or frequent moves, paperwork can become the barrier.
In New York, another part of the same law has already begun reshaping coverage. Nearly 500,000 moderate-income residents were set to lose coverage July 1 through New York’s Essential Plan, a low-cost program connected to the Affordable Care Act. The program had covered residents earning between 200 and 250 percent of the federal poverty level, or up to $39,900 for a single person and $66,625 for a family of three.
The Guardian reported that the pilot program was approved in 2023 and meant to continue until 2028. It offered coverage with no premiums or deductibles and minimal co-pays. But after HR 1 cut Essential Plan funding and ended health insurance tax credits for lawfully present immigrants, New York moved to shrink the program.
Community groups are now trying to help people find replacement coverage before a 60-day deadline, after which many may have to wait until open enrollment in November. For people losing low-cost coverage, the replacement options often come with premiums, deductibles, and out-of-pocket costs they cannot afford.
“It’s an all hands on deck situation,” said Maia Dillane, senior director of strategy and implementation at the Arab-American Family Support Center in New York.
Reham Bader, director of the community health and well-being program at the same organization, said many families are deciding whether they can afford to enroll in a marketplace plan at all.
“Families are having to choose how they’re going to split their costs when it comes to their healthcare, food, etc.,” Bader said.
The New York coverage losses may be only the beginning. Health policy analysts at KFF project that as many as 1.1 million New Yorkers could lose health insurance by 2034 when other HR 1 provisions are included. Nationally, The Guardian reported, the law could add 10 million people to the uninsured population over the next decade, largely because of Medicaid work requirements that analysts expect to be difficult to administer.
The lawsuit focuses on that administrative burden. In the complaint, states argue that CMS changed course after months of communications and guidance that states had relied on for implementation planning. The Associated Press reported that state officials say the new definition of medical frailty came as a surprise and left Medicaid directors without clear answers on what documentation will be required.
New York Attorney General Letitia James, one of the officials suing the administration, said the rule could bury vulnerable residents in paperwork.
“New Yorkers who are battling cancer, living with a disability, managing a serious mental health condition, or recovering from addiction should be able to get the health care they need without being buried in paperwork,” James said in a statement.
The fight now moves on two tracks. In court, the states are seeking to block the CMS rule before the January deadline. On the ground, enrollment workers, community health centers, and patients are already dealing with coverage cuts that began July 1.
For clinics that serve low-income communities, the concern is that people who lose coverage will not disappear from the health care system. They will delay care, ration medication, skip preventive appointments, and return sicker, often through emergency rooms or safety-net providers already operating on tight margins.
Dr. Adam Aponte, chief executive at the East Harlem Council for Human Services, said the July coverage losses are an early warning. “This is just the tip of the iceberg, right – because come January all the other impacts of HR1 start to kick in,” he said.
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