Employers are failing to insure the working class – Medicaid cuts would leave them even more vulnerable

The Congressional Budget Office estimates that 7.8 million Americans across the U.S. would lose their coverage through Medicaid – the public program that provides health insurance to low-income families and individuals – under the One Big Beautiful Bill Act making its way through Congress.

That includes 248,000 to 414,000 of my fellow residents of Michigan based on the House Reconciliation Bill in early June 2025. There are similarly deep projected cuts within the Senate version of the legislation.

Many of these people are working Americans who would lose Medicaid because of the onerous paperwork involved with the proposed work requirements.

They wouldn't be able to get coverage in the Affordable Care Act Marketplaces after losing Medicaid. Premiums and out-of-pocket costs are likely to be too high for those making less than 100% to 138% of the federal poverty level who do not qualify for health insurance marketplace subsidies. Funding for this program is also under threat.

And despite being employed, they also wouldn't be able to get health insurance through their employers because it is either too expensive or not offered to them. Researchers estimate that coverage losses would lead to thousands of medically preventable deaths across the country because people would be unable to access health care without insurance.

I am a physician, health economist and policy researcher who has cared for patients on Medicaid and written about health care in the U.S. for over eight years. I think it's important to understand the role of Medicaid within the broader insurance landscape. Medicaid has become a crucial source of health coverage for low-wage workers.

A brief history of Medicaid expansion.

Michigan removed work requirements from Medicaid

A few years ago, Michigan was slated to institute Medicaid work requirements, but the courts blocked the implementation of that policy in 2020. It would have cost upward of US$70 million due to software upgrades, staff training, and outreach to Michigan residents enrolled in the Medicaid program, according to the Michigan Department of Health and Human Services.

Had it gone into effect, 100,000 state residents were expected to lose coverage within the first year.

The state took the formal step of eliminating work requirements from its statutes earlier this year in recognition of implementation costs being too high and mounting evidence against the policy's effectiveness.

When Arkansas instituted Medicaid work requirements in 2018, there was no increase in employment, but within months, thousands of people enrolled in the program lost their coverage. The reason? Many people were subjected to paperwork and red tape, but there weren't actually that many people who would fail to meet the criteria of the work requirements. It is a recipe for widespread coverage losses without meeting any of the policy's purported goals.

Work requirements, far from incentivizing work, paradoxically remove working people from Medicaid with nowhere else to go for insurance.

Shortcomings of employer-sponsored insurance

Nearly half of Americans get their health insurance through their employers.

In contrast to a universal system that covers everyone from cradle to grave, an employer-first system leaves huge swaths of the population uninsured. This includes tens of millions of working Americans who are unable to get health insurance through their employers, especially low-income workers who are less likely to even get the choice of coverage from their employers.

Over 80% of managers and professionals have employer-sponsored health coverage, but only 50% to 70% of blue-collar workers in service jobs, farming, construction, manufacturing and transportation can say the same.

There are some legal requirements mandating employers to provide health insurance to their employees, but the reality of low-wage work means many do not fall under these legal protections.

For example, employers are allowed to incorporate a waiting period of up to 90 days before health coverage begins. The legal requirement also applies only to full-time workers. Health coverage can thus remain out of reach for seasonal and temporary workers, part-time employees and gig workers.

Even if an employer offers health insurance to their low-wage employees, those workers may forego it because the premiums and deductibles are too high to make it worth earning less take-home pay.

To make matters worse, layoffs are more common for low-wage workers, leaving them with limited options for health insurance during job transitions. And many employers have increasingly shed low-wage staff, such as drivers and cleaning staff, from their employment rolls and contracted that work out. Known as the fissuring of the workplace, it allows employers of predominately high-income employees to continue offering generous benefits while leaving no such commitment to low-wage workers employed as contractors.

Medicaid fills in gaps

Low-income workers without access to employer-sponsored insurance had virtually no options for health insurance in the years before key parts of the Affordable Care Act went into effect in 2014.

Research my co-authors and I conducted showed that blue-collar workers have since gained health insurance coverage, cutting the uninsured rate by a third thanks to the expansion of Medicaid eligibility and subsidies in the health insurance marketplaces. This means low-income workers can more consistently see doctors, get preventive care and fill prescriptions.

Further evidence from Michigan's experience has shown that Medicaid can help the people it covers do a better job at work by addressing health impairments. It can also improve their financial well-being, including fewer problems with debt, fewer bankruptcies, higher credit scores and fewer evictions.

Premiums and cost sharing in Medicaid are minimal compared with employer-sponsored insurance, making it a more realistic and accessible option for low-income workers. And because Medicaid is not tied directly to employment, it can promote job mobility, allowing workers to maintain coverage within or between jobs without having to go through the bureaucratic complexity of certifying work.

Of course, Medicaid has its own shortcomings. Payment rates to providers are low relative to other insurers, access to doctors can be limited, and the program varies significantly by state. But these weaknesses stem largely from underfunding and political hostility – not from any intrinsic flaw in the model. If anything, Medicaid's success in covering low-income workers and containing per-enrollee costs points to its potential as a broader foundation for health coverage.

The current employer-based system, which is propped up by an enormous and regressive tax break for employer-sponsored insurance premiums, favors high-income earners and contributes to wage stagnation. In my view, which is shared by other health economists, a more public, universal model could better cover Americans regardless of how someone earns a living.

Over the past six decades, Medicaid has quietly stepped into the breach left by employer-sponsored insurance. Medicaid started as a welfare program for the needy in the 1960s, but it has evolved and adapted to fill the needs of a country whose health care system leaves far too many uninsured.

Sumit Agarwal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.