Jun, 06, 2025

The Proposed One Big Beautiful Bill Act Would Mean Dramatic Change for Immigrant Health Coverage

Manatt Health 

On Thursday, May 22, the U.S. House of Representatives passed its reconciliation legislation, the “One Big Beautiful Bill Act.” If enacted in its current form, the bill would significantly increase rates of uninsurance for immigrants—including many non-citizens who are lawfully present in the country. This expert perspective analyzes the combined impact of the bill’s provisions on non-citizen coverage across the Marketplace and Medicaid.

The House bill does two key things. First, with respect to the Marketplace, it eliminates or significantly delays eligibility for premium tax credits (PTC) for most lawfully present people. Second, it threatens steep financial penalties for states that operate certain types of coverage programs for non-citizens. As passed by the House, this penalty would apply not only to states that self-fund coverage for undocumented immigrants (as do 14 states and the District of Columbia), but also to the many states that have adopted optional forms of Medicaid and Children’s Health Insurance Program (CHIP) coverage for lawfully residing immigrants (primarily children), as authorized under federal law. Moreover, the penalty would strongly disincentivize states from operating state-funded programs to address most of the coverage gaps resulting from the new restrictions on Marketplace eligibility for low-income, lawfully present immigrants.

Eliminating or Delaying Coverage of Lawfully Present Immigrants

Under the Affordable Care Act (ACA), PTC are available to lawfully present immigrants on the same terms as U.S. citizens. In addition, PTC are available to immigrants—including those whose income is under 100 percent of the federal poverty level (FPL)—if they are not eligible for Medicaid due to immigration status and meet all other eligibility requirements. This system fills the gaps left by Medicaid: under federal law, only certain types of lawfully present immigrants are eligible for Medicaid coverage, and many of them are subject to a five-year waiting period after receiving a qualifying immigration status.

The House bill creates new coverage gaps in the Marketplace by limiting PTC eligibility to a narrower set of lawfully present immigrants and subjecting the majority of them to the same five-year waiting period as under Medicaid. As a result, Lawful Permanent Residents (LPRs) (also known as Green Card holders) would not be eligible for coverage through Medicaid or to claim a PTC to help afford Marketplace coverage for the first five years after gaining legal status, and certain other groups of lawfully present non-citizens would be shut off from one or both pathways permanently. Low-income LPRs are thus far more likely to become uninsured under the House bill.

Together, these Marketplace provisions restricting which non-citizens are eligible for PTC and when they are eligible are estimated by the Congressional Budget Office (CBO) to save roughly $124 billion in fiscal years (FY) 2025-2034, with a coverage loss of roughly 1.3 million individuals.

Restrictions on the Categories of Non-Citizens Eligible for PTCs[1]  

The House provision, effective in plan year (PY) 2027, would limit the categories of immigrants who qualify for PTC to LPRs, certain Cuban migrants, and people residing in the U.S. under a Compact of Free Association (COFA) (people from the Federated States of Micronesia and the Republic of the Marshall Islands). Among the immigrant statuses that would be newly denied access to PTC are:

  • Refugees and asylees;
  • Recipients of Deferred Action for Childhood Arrivals (DACA) (reversing a 2024 final rule newly expanding PTC to DACA recipients)[2];
  • Victims of violence and trafficking;
  • Children granted special immigrant juvenile status; and
  • People who have been granted humanitarian parole, temporary protected status, deferred action, deferred enforced departure, or withholding of removal.

These groups of immigrants, except DACA, are eligible to enroll in the Marketplaces but would be denied PTC at any income level, including middle-class families without affordable employer-sponsored coverage. The House bill would not only eliminate access to PTC for DACA recipients, but also eliminate Marketplace eligibility (with or without PTC) for this population.[3]

Ending PTC for Immigrants Subject to a Medicaid Waiting Period[4]

Medicaid currently has more restrictive rules than the Marketplace on eligible immigration statuses. Today, the ACA allows lawfully present individuals who are ineligible for Medicaid due to their immigration status—such as LPRs in the five-year Medicaid waiting period—to qualify for PTC, even if their income is below 100% of the FPL (an option not available to other groups). Effective in PY 2026, this provision would disallow PTC for all individuals with income below 100% FPL who are ineligible for Medicaid due to immigration status, while continuing to allow PTC for eligible immigrants with income between 100% and 400% of the FPL, on par with other groups. Basic Health Plans—which cover people ineligible for other minimum essential coverage with incomes between 133% and 200% of the FPL—could only cover eligible immigrants if their income is at least 133% FPL. These provisions mean that the lowest-income LPRs, though they have an eligible immigration status under the House bill, would be subject to a five-year bar that creates a gap in coverage if their income is between 0% and 100% of the FPL.[5]

Reducing Federal Medicaid Funding for Expansion States That Support Coverage for Certain Immigrants

Because undocumented immigrants and certain other non-citizens are generally ineligible for full-coverage Medicaid or PTC on the Marketplace, several states offer coverage to these individuals through separate, state-funded programs. In some cases, these programs are limited to children and/or a narrow set of benefits, but others cover broader populations and benefits.

Beginning October 1, 2027, the House bill would reduce the federal medical assistance percentage (FMAP) for the Medicaid expansion population from 90% to 80% for states that cover undocumented immigrants and some lawfully residing individuals.[6]  (There is no financial penalty for states that cover any of these populations but have not expanded Medicaid under the ACA.) CBO predicts this provision would end coverage for 1.4 million immigrants as states close their existing programs. That said, the bill’s provisions are not entirely clear as to the groups of non-citizens that trigger the penalty, as described below.

Specifically, the final House bill imposes the penalty on states that operate “comprehensive health benefits coverage”[7] programs or “health insurance coverage”[8] for, or subsidize the purchase of private plans by, certain groups of non-citizens, regardless of whether the coverage is funded solely by state dollars or a combination of state, federal, and/or philanthropic dollars. The original House bill focused primarily on undocumented populations, but the bill as passed expands the penalty to apply more broadly. The penalty would not apply to coverage programs limited to the following groups of lawfully residing immigrants:

  • These individuals qualify for federal Medicaid coverage, but only after a five-year waiting period. The FMAP penalty would not apply if a state chose to fund coverage for these individuals during that waiting period. As noted above, under the House bill, LPRs would newly face a five-year waiting period for PTC eligibility in the Marketplace as well.
  • Other “Qualified Non-Citizens.” For certain other qualified non-citizens[9], the Medicaid waiting period would apply, and they would no longer be eligible for Marketplace PTC at any income level. This group includes asylees, refugees, and certain other immigrants. (Note that individuals who have held humanitarian parole for at least one year are normally considered “qualified non-citizens,” but the House bill would nonetheless impose the FMAP penalty for coverage of these parolees, as described below.)
  • Individuals covered under the “CHIPRA 214 option.” An option taken up by most states to provide federally funded Medicaid coverage to lawfully residing children and/or pregnant people. This option allows states to cover qualified non-citizens during the five-year bar, plus other pregnant women and children who are lawfully residing in the United States.
    • The bill does not expressly mention the corresponding CHIPRA 214 option for CHIP coverage of lawfully residing children and pregnant people. That said, existing law provides that CHIPRA 214 applies to CHIP in the same manner as Medicaid, so it’s possible the Centers for Medicare & Medicaid Services (CMS) would apply the exemption to CHIP coverage as well.

The penalty would apply to coverage for any of the following groups:

  • Undocumented immigrants, including coverage programs limited to undocumented children (the most common type of state-funded program).
  • Individuals who have received humanitarian parole. This provision creates two types of ambiguity:
    • Congress has entitled certain groups of humanitarian parolees to federal benefits on the same terms as refugees, including Afghans who aided U.S. operations in Afghanistan, people fleeing violence in the Ukrainian war, and certain individuals from Cuba and Haiti. Although not expressly addressed in the bill, such individuals would presumably not trigger the penalty, which would otherwise operate as a mandatory FMAP cut for all expansion states.
    • In addition, almost all states currently cover humanitarian parolees after the five-year waiting period. The bill appears to apply the penalty to this population as well.
  • Certain other lawfully residing immigrants [sometimes referred to as “people residing under the color of law” (PRUCOLs)], such as DACA recipients, individuals with pending applications for asylum, and people with work or student visas.

Because affected coverage programs are typically funded solely with state dollars, the federal government does not bear the cost of maintaining those programs, and so does not experience any savings if a state terminates a state-funded coverage program to avoid the FMAP penalty, even as it results in significant numbers of people losing state-funded coverage.

Next Steps

The immigrant coverage provisions are sweeping and, given their magnitude, could lead to coverage losses not fully accounted for in CBO’s estimates. Coverage declines would reverberate through other parts of the healthcare system, such as community health centers, which serve a disproportionate number of immigrant families who will no longer have a coverage option. All told, the immigrant provisions in the House bill would dramatically reshape the coverage landscape for immigrants, including those lawfully residing and paying taxes in the U.S. As the legislation progresses in the Senate, this expert perspective will be updated to reflect any revisions.

[1] Title XI, Section 112101.

[2] Prior to 2024, DACA recipients were not treated as lawfully present for the purpose of Marketplace eligibility. Because of that, they were not only ineligible for PTC, but also for enrollment in a Marketplace plan. That changed last year when CMS published a final rule clarifying that DACA recipients are considered lawfully present and eligible for enrollment in the Marketplaces and PTC. After a legal challenge and court order in December 2024, DACA recipients are no longer eligible for coverage in 19 plaintiff states. Recipients in all other states are unaffected by the court decision and may still enroll in coverage. Under the House provision, DACA recipients nationwide would no longer be considered lawfully present and would become ineligible to enroll in Marketplace coverage or receive PTC beginning in PY 2026.

[3] Title IV, Section 44201.

[4] Title XI, Section 112102.

[5] The other two immigrant statuses permitted coverage under the House bill—certain Cuban migrants and people entering under COFA—are not currently barred from coverage by Medicaid’s five-year waiting period so presumably may continue to receive PTC, even with income below 100% of the FPL. See 8 U.S.C. § 1613(b)(1).

[6]  Title IV, Section 44111.

[7] This term is not defined in the bill, the Medicaid statute, or the statutes for other federally funded health programs. A section of the ACA titled “comprehensive health insurance coverage” requires coverage for all Essential Health Benefits. Meanwhile, when CHIP was enacted in 1997, Congress grandfathered in certain “existing comprehensive state-based coverage” programs that included “coverage of a range of benefits.” If the bill is enacted as drafted, it is unclear how this term might be interpreted by CMS, states, and the courts.

[8] The term “health insurance coverage” is defined to include various forms of medical benefits offered by a state-licensed health insurance issuer. Notably, this provision of the bill does not reference essential health benefits or otherwise reference any standard for comprehensiveness. This suggests that a state could potentially be subject to the FMAP penalty for subsidizing the purchase of a plan that covers only a limited set of benefits, such as a catastrophic coverage plan. The federal government generally lacks the authority to regulate how states spend their own funds. Congress can impose conditions on federal funding to incentivize state behaviors, but there are limits on this power. A legal challenge is likely if Congress enacts a penalty on federal Medicaid funding based on a state’s activities outside the Medicaid program.

[9] The Personal Responsibility and Work Opportunity Act defines “qualified non-citizen” to include green card holders (i.e., lawful permanent residents), asylum recipients, and refugees, among other individuals.