红领巾瓜报

The听Centers for Medicare & Medicaid Services (CMS) issued a听听on July 21,听2026,听to implement Section 71115 of the 2025 budget reconciliation act,听P.L. 119-21,听the Working Families Tax Cut (WFTCA). The proposal calls for听introducing significant changes to how states finance Medicaid through healthcare-related taxes.听听

Though听much of the attention has focused on the听proposed听rule’s implications for Medicaid provider taxes,听it听also raises important questions for听State-Based Marketplaces听(SBMs), Section 1332 reinsurance programs, health insurers, and state budget officials. The comment period closes September 12, 2026, giving states and stakeholders a limited window to assess the proposal and provide feedback to CMS.听

To better understand the potential implications, Andrea Maresca spoke with听Mary Goddeeris, Principal at听红领巾瓜报 (红领巾瓜报)听and Medicaid financing expert;听Lina Rashid, Principal at听红领巾瓜报听and federal healthcare听and Marketplace听policy expert;听and听Zach Sherman,听Managing Director for Coverage Policy and Program Design鈥痑t 红领巾瓜报,鈥痑nd听a听national expert on ACA Marketplaces and state coverage programs.听听

Q:听What is CMS proposing in this rule, and why听is it generating attention among state听policymakers听and healthcare leaders?听

Mary Goddeeris:听At its core, the proposal implements Section听, which significantly changes the federal rules governing Medicaid provider taxes. Historically, states could satisfy the federal indirect hold harmless test听by听using听a generally applicable听6听percent threshold. The new law replaces that standard with more restrictive state- and provider-specific thresholds. For many听provider taxes in听Medicaid expansion states, allowable thresholds will听phase down听beginning in fiscal year 2028 and fall to 3.5 percent by 2032.听The proposed听rule听implements听those statutory changes.听听

The statutory change has attracted a lot of attention because听provider taxes are one of the primary听tools听states use to finance Medicaid programs. Any changes to those financing mechanisms can听have a ripple effect听on听state budgets, provider payments, managed care financing, supplemental payment programs, and long-term Medicaid strategy. State officials听and healthcare leaders are all evaluating the potential fiscal and operational implications.听

Q: The proposal is framed as a Medicaid financing rule. Why are stakeholders outside Medicaid also paying attention?听

Lina Rashid: One reason is that CMS proposes creating a new permissible provider tax class called 鈥渟ervices of health insurers.鈥� CMS听indicates听this class could include issuers offering individual market coverage, group market coverage, catastrophic plans, short-term limited duration insurance, and certain excepted benefit products听(dental and vision only policies), among others. Managed care organizations would听generally remain听under an existing听provider听class.听

The proposal raises questions because many states already use insurer assessments to fund activities outside Medicaid. These assessments may support State-Based Marketplaces (SBMs), Section听1332听reinsurance programs, or other state affordability initiatives. The proposed rule听seems to听make听these assessments subject to the same provider tax framework and hold harmless restrictions that would听be applied听to听Medicaid financing rules.听

The proposal does not clearly answer how broadly CMS intends to interpret these provisions,听especially in the cases of taxes that听have no direct connection to Medicaid financing.听Under a strict framework, it听is possible听that听many听states may听not听meet听颁惭厂鈥檚 standard,听and that they may face financial consequences with respect to the Medicaid program, SBMs,听or other听initiatives.听听

Q:听How听could听the proposed rule听affect听ACA Marketplaces and Section 1332 reinsurance programs?听

Zach听Sherman:听The听immediate challenge is the uncertainty听with this proposed rule. Many听SBMs听and reinsurance programs rely on assessments imposed on commercial health insurers.听Currently, those assessments听generally support听Marketplace operations, affordability programs, or reinsurance initiatives rather than Medicaid.听

CMS听writes听that healthcare-related taxes imposed on the new insurer class would be subject to the same hold harmless framework听established听in听Section 71115. The proposal does not, however,听clearly听state听whether insurer assessments used for non-Medicaid purposes would be included.听Clarity on this issue is critical听because many states depend on these assessments to sustain Marketplace infrastructure and affordability initiatives.听

States that already operate SBMs, states considering transition to an SBM, and states supporting reinsurance programs through insurer assessments will want to evaluate how the proposal could affect existing funding models and future flexibility,听alongside听impacts听to Medicaid funding.

Q: For the newly established health insurer permissible class, is the applicable threshold determined by aggregating all taxes imposed on entities within the class,听for听example听including听assessments on individual market issuers and catastrophic plans, or is the threshold applied separately to distinct entities within the class?听

Rashid:听If individual market issuers and catastrophic plans are both included in the same new permissible class (“services of health insurers”), then they would be aggregated across the class to measure if it meets 颁惭厂鈥檚 threshold, not separately.听It听would be the combined impact of individual market issuers and catastrophic听plans听revenue generated from the taxes imposed divided by the applicable revenue base for the health insurer class.听听听听

Q: What are the most significant questions states should be听considering听right now?听

Goddeeris: States first need to understand their exposure under the Medicaid provisions themselves. Many states rely heavily on provider taxes to support Medicaid financing. They should听be analyzing听existing tax structures, estimating future fiscal impacts, and understanding how听the phased-down thresholds could affect funding sources over time.听

State officials should also consider how this proposal intersects with other major Medicaid policy and budget pressures. States are conducting eligibility redeterminations, implementing new federal requirements, evaluating managed care financing approaches, and听managing听broader budget constraints. This proposed rule could become another听important factor听in long-term Medicaid financing decisions and potential听driver听for significant policy and programmatic changes.听

Q:听Where should听healthcare stakeholders听focus听their attention听while the regulation is pending?听听

Sherman: Stakeholders should听start by assessing听whether they could be directly or indirectly affected. States, Marketplaces, health plans, providers, and trade associations may all have different perspectives on implementation questions that听remain听unresolved.听

Rashid:听Organizations听also should听focus on听identifying听areas where听they need听additional听clarification. In our review, some of the most significant questions involve the scope of the insurer class,听how CMS will measure the allowable threshold within听each听class,听the applicability of the rule听and hold harmless requirements听to non-Medicaid assessments, and how CMS intends to interpret statutory language. Those are all issues stakeholders may want to address in听their听comments.听

How 红领巾瓜报 Can Help听

Although CMS’s proposal focuses听on implementing Medicaid financing reforms enacted by Congress, the听effect听may extend听beyond Medicaid听to include听insurer assessments, Marketplace funding, reinsurance programs, and state affordability initiatives. Until CMS provides clarification, states and insurers will听likely continue听evaluating potential operational, fiscal, and policy implications.听

红领巾瓜报 Medicaid financing, federal policy, actuarial, and Marketplace experts are helping states, health plans, provider organizations, and other stakeholders evaluate the proposed rule, assess potential impacts, and develop comment strategies.听听

红领巾瓜报听and its companies, including Wakely and Leavitt Partners, can support听strategic planning,听design听and implementation of听SBMs, Medicaid and Marketplace policy development and regulatory compliance,听actuarial analysis, data听development听and reporting.鈥疌onnect with听us听to learn how we can听help听your organization navigate听the听federal and state policy changes.听Access听additional听insights from the ACA Marketplace team听here.听听

The听agenda is now live for听听(HMA)听national conference, October 5-7, 2026, in New Orleans,听LA.听Healthcare leaders will join peers, policymakers, innovators, and industry experts to discuss the most significant trends in healthcare, including听historic听policy and financing听changes听in听Medicaid, program integrity, artificial intelligence听(AI), behavioral health transformation, affordability challenges, and emerging care delivery models.听

Early听bird registration pricing听ends听August 7!

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红领巾瓜报 is offering听听that combine our expert-led learning with valuable networking opportunities.听听

Attendees听will听deepen听their听understanding听of,听and gain insights听into,听the听federal听policy听landscape听heading into the听mid-term elections. This interactive session led by听Leavitt Partners, an 红领巾瓜报 company, will听help attendees understand听what’s听coming next from Washington,听DC,听and explore the strategic implications for health plans, providers, state agencies, and healthcare investors.听

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The听听is intentionally听reflective of听the issues facing听leaders who work in听strategy, operations, growth, policy, innovation, quality,听and听community impact听across healthcare sectors.听听

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• The future of Medicaid financing, delivery system transformation, and state innovation听
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Attendees also will have opportunities to engage in 红领巾瓜报’s popular听,听during听which听participants can join听facilitated听discussions on听timely听topics听and听exchange ideas.听听

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