On September 10th, Governor Hochul announced her intention to terminate New York’s 1332 State Innovation Waiver that had expanded eligibility for the Essential Plan. This action is expected to allow New York to access a reserve fund frozen during the waiver to replace federal funding lost as a result of the One Big Beautiful Bill Act (OBBBA).
The Essential Plan is a health insurance option for adults aged 19 to 64 with incomes too high for Medicaid, or those with lower incomes but who are ineligible for Medicaid (e.g., certain immigrants). The Essential Plan has no monthly premium, no deductible, and minimal cost-sharing for enrollees.
In 2015, New York State first created the Essential Plan as a Basic Health Plan (BHP) authorized under Section 1331 of the Affordable Care Act (ACA). In 2024, the federal government approved the State’s request to switch to a 1332 State Innovation Waiver and replace the BHP with a mirror plan. This plan, also called the Essential Plan, expanded the upper income eligibility limit from 200% of the Federal Poverty Level (FPL) to 250% of FPL (a group also known as EP5). New York’s waiver was later amended to distribute cost-sharing reduction subsidies (unavailable under the 1331 authority) to individuals between 250% and 400% of FPL. As a condition for 1332 waiver approval, a reserve fund that New York accumulated under the original Section 1331 authority (from 2015-2024) was frozen, preventing the state from accessing over $10 billion dollars while the waiver is in effect.
The OBBBA eliminates federal support for a large group of Essential Plan enrollees, namely those who are not lawful permanent residents (green card holders) or who are not eligible for Medicaid due to immigration status. As a result, the State expects to lose federal funding for nearly half of current Essential Plan enrollees, approximately 730,000 individuals. Because of this lost federal support, the state has decided to revert the Essential Plan back to a BHP and access the BHP reserve fund to maintain benefits for those with incomes up to 200% FPL who are losing federal funding.
The State intends to implement these changes by July 1, 2026. Adults with incomes from 200%-250% of FPL will be transitioned to Qualified Health Plans, with higher cost-sharing and higher premiums, affecting approximately 440,000 New Yorkers. The State seeks to collaborate with CMS to design and provide affordable coverage options for these members who will no longer qualify for the Essential Plan.
Additional information is available here. Public comment may be submitted to NYSOH.Team@health.ny.gov through October 10th.