The New York State Department of Health announced on September 10, 2025, that it will take steps to maintain health care access for residents after the passage of the federal budget bill H.R.1. The law, passed by Congressional Republicans, eliminates $7.5 billion in annual funding for the state’s Essential Plan, a program that currently covers nearly 1.7 million low- and middle-income New Yorkers.
In response to this loss of federal support, state officials plan to end the Section 1332 State Innovation Waiver and revert to a Basic Health Program model. This change is intended to keep an estimated 1.3 million people enrolled in affordable health coverage despite reduced federal resources.
“I have been very direct and clear with New Yorkers about the disastrous impact of H.R.1 on our health care system, and the devastating choices it would force states to make,” said State Health Commissioner Dr. James McDonald. “By reverting to a Basic Health Program, Governor Hochul is making sure that 1.3 million working people will be able to keep their affordable health insurance. Even with these steps, too many New Yorkers – nearly half a million– will lose affordable health coverage and be forced to choose between keeping food on the table and paying their medical bills. I am grateful to Governor Hochul for standing up and doing what’s right while Washington Republicans rip health care away from their constituents.”
Officials estimate that about 450,000 middle-class residents will lose access to zero-premium comprehensive insurance as a result of these cuts.
The reduction in funding is expected to increase uncompensated care costs for providers across New York State as more people become uninsured. This may affect service delivery at hospitals and clinics statewide and could lead some facilities to close or reduce services. There are also concerns about job losses in communities as healthcare dollars decrease.
Last year, state leaders celebrated the Section 1332 waiver for expanding Essential Plan eligibility up to individuals earning around $39,125 annually—250% of the federal poverty level—and offering comprehensive insurance without monthly premiums or deductibles.
NY State of Health Executive Director Danielle Holahan stated: “The Essential Plan has been the linchpin to driving down New York’s uninsured rate among those who do not qualify for Medicaid but still struggle with health care costs. Many enrollees are essential workers, small business employees, and families working multiple jobs to make ends meet. Our decision to terminate the waiver allows us to preserve coverage for as many New Yorkers as possible and protect more than a decade of progress in expanding healthcare.”
The state plans an orderly transition while working with the Centers for Medicare & Medicaid Services (CMS) on new coverage options for those affected by these changes. Impacted consumers will receive at least 90 days’ notice before any eligibility changes take effect; there will also be a special enrollment period for CMS-approved alternatives along with enhanced customer service assistance during this process.
A public comment period on this proposed transition begins September 10 and runs through October 10, 2025; instructions can be found at https://info.nystateofhealth.ny.gov/1332.
If approved by CMS, New York expects its shift back to a Basic Health Program model could take effect by July 1, 2026.
