What The One Big Beautiful Bill Means For Medicaid Insurers

Medicaid insurers were already battling operational and financial headwinds before the enactment of the One Big Beautiful Bill Act (OBBB). Some of the nation’s most prominent Medicaid managed care organizations (MCO) reported that rising medical costs resulted in declining earnings during the second quarter of 2025. The situation was dire enough for Fitch Ratings to lower the insurance sector’s outlook from neutral to deteriorating in mid-June. The new law will intensify pressure on insurer’s bottom lines and force them to move quickly on making important operational changes.

While the OBBB’s Medicaid provisions aren’t required to kick in until Dec. 31, 2026, MCOs — especially those without diversified offerings — must start preparing for a more volatile, fragmented, and compliance-heavy landscape. Below we spotlight six tactics Medicaid payers should adopt to ensure financial viability and to maintain a competitive edge.

Federal Policy Changes with Local Impacts

It’s worth reinforcing some of the high-level changes included in the OBBB:

• Work requirements: Most adults ages 19–64 must now demonstrate 80 hours/month of qualifying activity to retain coverage.
• Redetermination every six months: Shortened from the current annual schedule, this increases the likelihood of coverage lapses due to administrative error or missed deadlines.
• Tighter SNAP coordination: Asset testing and new work rules for Supplemental Nutrition Assistance Program (SNAP) eligibility introduce additional churn across linked programs, impacting populations who rely on both benefits for stability.

These changes, coupled with others included in the OBBB, could result in 7.8 million to 11 million individuals losing Medicaid or related coverage, according to the Congressional Budget Office. Adults without dependents, those with fluctuating incomes, and SNAP participants are most at risk, with coverage often lost due to paperwork failures rather than true ineligibility.

States bear responsibility for verifying a beneficiary’s work status and implementing a redetermination process. We expect to see variation across state lines, which will operational complexity for MCOs, especially national payers managing populations in vastly different parts of the country.

6 areas impacted, 6 actions to take

Shifts triggered by the OBBB go well beyond enrollment loss and require a fundamental reset in how payers manage risk, forecast costs, and engage members. We outline six functional areas that will be impacted and how payers can respond:

Churn Risk = Financial Volatility: With redetermination being required every six months and new reporting for work requirements, Medicaid payers are bracing for more frequent disenrollment, largely due to paperwork failures, not ineligibility. Each drop in coverage erodes revenue and disrupts care continuity, while those who remain enrolled may be sicker and more costly to manage. This volatility skews acuity profiles, complicates cost forecasting, and destabilizes assumptions underlying capitation rates. Medicaid-only plans are especially exposed to sharp swings in membership and margins.

Payers must invest in administrative capabilities — from document management that relies on natural language processing to rapid redetermination follow-up and in-person support. A robust back-office infrastructure will propel plans as they aim to retain eligible members.

D-SNP Growth Turns Risky: A dual-eligible member who briefly loses Medicaid — even due to an administrative issue — is automatically disenrolled from their dual eligible special needs plan (D-SNP), disrupting revenue and care. As eligibility becomes less predictable, states may also pull back on expanding fully integrated models like fully integrated dual eligible special needs plans and highly integrated dual eligible special needs plans.

Payers should stratify their dual populations to identify segments with more stable eligibility, such as long-term care or members with supplemental security income, and prioritize them for D-SNP growth. In parallel, they should explore how capabilities built to manage redeterminations — like automated document intake and outreach workflows — can be extended to support dual-eligible retention and minimize disenrollment risk.

Outreach Must Become Education: Traditional outreach centered on onboarding or open enrollment is no longer enough. Under the OBBB, states, MCOs, and members face ongoing administrative hurdles: reporting work hours, maintaining eligibility, and navigating SNAP-linked requirements. Yet strict Medicaid marketing rules constrain how and when plans can communicate. The real challenge is helping members understand what’s changing and how to respond — before they churn out of coverage.

Payers must build education into every member touchpoint — from case managers and call centers to provider offices. Embedding eligibility guidance into routine interactions, supported by user-friendly tools that simplify submission of required information, can transform passive touchpoints into retention engines. The goal: make requalification feel seamless, not separate.

SNAP as a Leading Indicator: Changes to SNAP — particularly around work requirements and asset testing — will create ripple effects across Medicaid. A family losing food assistance due to tightened rules or paperwork issues may soon lose health coverage as well, even if still clinically or financially eligible. For Medicaid payers, SNAP trends should now be treated as an early-warning system for churn risk.

Payers need a rapid-response system to address emerging food insecurity — from building referral pipelines with food banks and shelters to embedding outreach teams or hosting mobile pantry drives. Bridging the gap between risk signals and member-level support is no longer optional — it’s a core operating responsibility.

Build Geographic Strategy into Core Operations: Medicaid can no longer be treated as a single, unified line of business. State-level divergence in implementing OBBB provisions necessitates that payers adapt to local realities. In some states, limited infrastructure or support for eligibility tracking may exacerbate member churn and administrative burden.

Payers should proactively engage with state agencies to improve the cadence, accuracy, and interoperability of eligibility and work verification data. Where states do not offer standardized tools, payers should collaborate — even across competitors — to advocate for shared infrastructure that simplifies the process for members and streamlines compliance for plans.

Financing Headwinds from Provider Tax Reform: The OBBB also imposes tighter federal limits on how states use provider taxes to fund their share of Medicaid. For payers, this could translate into downward pressure on capitation rates, especially in states that rely heavily on provider tax revenue. As states recalibrate their financing strategies, plans may face more volatile rate-setting processes, delayed approvals, and growing tension between providers seeking to preserve revenue and payers managing constrained margins.

Payers should consider joint advocacy with provider groups and state agencies to safeguard rate stability. In parallel, they should actively confer with states to understand how emerging shortfalls may affect reimbursement rates, network adequacy, or member benefits — and prepare mitigation strategies accordingly.

Navigating the new reality starts now

We are heading into a critical stage as state regulators start mapping out implementation of the OBBB. It’s important that they provide clarity to beneficiaries and MCOs on how they expect to enforce new reporting and verification requirements and, critically, close funding gaps. Understanding how states plan on moving forward will help MCOs ensure that they can effectively guide members at risk of losing Medicaid to an ACA product or another plan, which will help maintain continuity of care for these patients.