How federal funding cuts will cost 500,000 New Yorkers their health insurance

This story was originally published by Healthbeat. Sign up for their public health newsletters at healthbeat.org/newsletters.

The massive federal budget cuts imposed by the Trump administration's One Big Beautiful Bill Act are beginning to play out. In New York, almost a half-million people are expected to lose their health insurance coverage through the state's Essential Plan on July 1.

The U.S. Centers for Medicare and Medicaid Services granted the state's request to revert to an earlier plan in a move that will maintain coverage for 1.3 million low-income New Yorkers. But almost 500,000 will be left without, because they will no longer meet the Essential Plan's income limit, which is being reverted to $31,920 a year for an individual and $66,000 for a family of four.

The state's health department has said it will send notices to those affected on Wednesday, laying out their options and next steps.

Michael Kinnucan is the health policy director at the Fiscal Policy Institute, an independent nonpartisan think tank that aims to promote sound and equitable fiscal policy to strengthen New York's economy.

Kinnucan met with Healthbeat to discuss the Essential Plan — how it works, how it's been successful, how the cuts will likely play out, and what that means for the broader health care system.

Many of those who lose coverage can turn to the individual market, but the premiums will be much higher and many people won't be able to afford it. And increasing the number of uninsured people affects the whole community, he said.

"We all go to the same hospitals and doctors, and if half a million people suddenly lose coverage and aren't able to go to the hospital or the doctor, that feeds through into hospital closures, into long wait lines at the emergency room," Kinnucan said.

This interview has been edited for clarity and length.

Can you begin by telling us how the Essential Plan works?

The Essential Plan is a unique feature of the health care landscape in New York. It's something we do differently from almost every other state in the country. In New York, the Essential Plan covers people who earn less than 250% of the federal poverty line, and who are not eligible for Medicaid, either because they earn too much or because they have a legal citizenship status that prevents them from getting Medicaid.

It's a big program. It covers1.7 millionNew Yorkers, and it provides high-quality, very cheap, or mostly free, health insurance to a low-income population — people making up to $40,000 a year for an individual. It's federally funded, but it's state-administered. If you go to the New York state health exchange website to sign up for insurance, and it turns out that you're in an income category and other aspects of your life make you qualified for the Essential Plan, you get this very low-deductible, low-pay, high-quality insurance.

In other states, the equivalent population would buy health insurance on the individual marketplace, and they would get federal premium tax credits to subsidize them. But in New York, the state takes the federal funding and runs the central plan.

The Essential Plan enrollment has grown since it was launched in 2015, right?

Editor's note: Enrollment has grown from 380,000 in 2016 to 1.7 million in 2025, according to the Community Service Society,a New York-based nonprofit that studies affordable housing and health access. Its popularity stems from lack of monthly premiums and deductibles, comprehensive health benefits, and limited cost sharing.

That's right. It's been a real policy success story. Because it's low cost, many people enroll in it, and in particular, many healthy people enroll in it, which keeps costs really low. And the result of that is actually the federal funding we currently get to run it has historically been more than enough to support the whole program because costs are very low, lower than they were initially expected.

It's grown a lot. In 2024, the state was like, boy, this is working so well that they actually did a significant expansion of eligibility for the Essential Plan. Before 2024, you had to earn less than 200% of the federal poverty line to qualify. After 2024, itwent up to 250% of the federal poverty line.

But because it's low cost, because it's a very efficient program, and a lot of healthy people enroll and keep costs down for everyone, it hasn't cost the state any money to run the program. It's been more than fully covered by those federal subsidies that in other states, they would help people buy insurance on the individual market. In New York, we use them to buy people Essential Plan coverage instead.

More recently, H.R. 1, the One Big Beautiful Bill Act, imposed cuts that will affect the Essential Plan. What do those cuts mean for Essential Plan enrollees?

The cuts applied specifically to legal immigrants. Undocumented immigrants are almost entirely not eligible for federal health care subsidies of any kind, be it Medicaid, the Essential Plan, or premium tax credits, but H.R. 1 cut a whole bunch of legal immigrants off from federal health care benefits.

What it did, specifically with those populations, is it made them ineligible for premium tax credits all across the country. If you're, let's say, a green card holder, and you drive a cab, you need to buy insurance on the individual market, you're no longer eligible for premium tax credit, so that plan is going to cost you $10,000 to $12,000 a year.

In New York, because we operate differently with the Essential Plan, the equivalent cut was they cut off federal funding to support legal immigrants who are enrolled in the Essential Plan. That's a minority, but a very large part of the central plan enrollment.

Roughly speaking, of the 1.7 million people on the Essential Plan, about a million are U.S. citizens, and about 700,000 are lawfully present immigrants. All the funding for them got cut by H.R. 1. What that meant was that group didn't get kicked off the Essential Plan — they're still on the Essential Plan. What it meant was that the Essential Plan as a whole is really underfunded. It lost almost half of its federal funding, and that's forcing the state to make tough decisions.

What do these decisions mean for EP enrollees?

The funding cut from H.R. 1 has been so severe and threatening to the Essential Plan that many of us thought that it might need to be shut down entirely, which would have been a real catastrophe. It would have meant 1.7 million people losing health insurance. The state of New York came up with an alternative to shutting it down, which is to to shrink eligibility — to undo that expansion that happened in 2024 and reduce eligibility back to 200% of the federal poverty line.

It will be a smaller plan that will be cheaper to support. The state can continue to run the plan for everyone else below 200% of the poverty line indefinitely. Their coverage will be protected under this plan, but the people who are between 200% and 250% of the poverty line will be kicked off the Essential Plan. These are quite low-income people. They're earning between $35,000 and $40,000 a year for a single individual. That eligibility group is about 470,000 people.

Those are the people who are going to lose coverage under the state's new plan for the Essential Plan. They're going to lose coverage really quickly, starting this July. It's very concerning.

What happens next for enrollees?

Most but not all of this population are U.S. citizens. Most of them will be eligible to go in the individual market and purchase health insurance. They'll be able to get premium tax credits to support that. But the truth is there will be a big struggle to afford health insurance.

Again, these folks are making $35,000 to $40,000 a year. Even with the individual market, even with premium tax credits, they'll be paying $250 a month out of pocket. They'll face really high co-pays. The truth is that it's likely that many, many, many people in this population — probably more than half — are not going to be able to afford that coverage, and they'll become uninsured.

There's a separate, smaller group within this population who are lawfully present immigrants, and H.R. 1 actually made them disqualified for premium tax credits. That group, which is maybe 50,000 to 100,000 people — no one exactly is sure — will have no source of alternative coverage. In theory, they could still buy health insurance on the individual market, but they'd be paying over $1,000 a month. Given their incomes, there's no way they'd be able to afford it.

To summarize, the majority of this population who are U.S. citizens, they may be able to get health insurance in the individual market, but it'll be a very tight squeeze, and many of them will likely not be able to afford it and become uninsured. And there's a smaller group of immigrants in this population who will have no source of alternative coverage and will almost certainly become uninsured.

What can the state do to help?

The good news is that the Essential Plan is incredibly cheap and efficient to offer as health insurance, and that's because it's low cost. It has a relatively healthy, low-cost enrollment population. The state does a great job of regulating the rates that Essential Plan pays providers. That makes it much cheaper to offer than commercial insurance.

The state was preparing and reserving money for the eventuality where the Essential Plan had to be eliminated, and that would have increased the state's costs to cover different populations. Now that we know the Essential Plan will be around and it will cover most of its current population, we actually have $2.5 billion allocated in the state budget, which would be more than enough to cover the population at risk of losing coverage now and then.

The state said in a press release this week that it cannot make up for these cuts, but is working with insurers to ensure that anyone moving from the Essential Plan to a Qualified Health Plan mid year will see their deductible cut in half.

I don't know how to say this politely: It's not true that the state can't make up for the cuts. The state has a $260 billion a year budget. It could fully replace this coverage for this group of half a million New Yorkers for far less than 1% of that budget. It is well within the state's fiscal capacity to protect New Yorkers' coverage.

As the state legislators negotiate in the budget, it's their responsibility to make sure that does happen. Cutting people's deductible in half is good, as far as it goes. It's better than nothing, I suppose, but it is not remotely a replacement for Essential Plan coverage, which was free, as opposed to $250 a month, and which had very, very low deductibles, as opposed to the 2020 $500 deductibles that are common in exchange plans.

Is there anything you'd like to add?

The Essential Plan cliff happening in July, where half a million people are threatened with loss of insurance, is going to affect those people quite a bit. It's also going to affect their entire communities and the health care providers in their neighborhoods.

We all depend on the same health care system. We all go to the same hospitals and doctors, and if half a million people suddenly lose coverage and aren't able to go to the hospital or the doctor, that feeds through into hospital closures, into long wait lines at the emergency room, etc., etc. It's really a shared interest for all of us to make sure that everyone is covered.

Trenton Danielis a reporter covering public health in New York for Healthbeat. Contact Trenton at [email protected] or on the messaging app Signal at trentondaniel.88.