Colorado Medicaid prepares for HR1 changes that could put hundreds of thousands under new coverage rules

Colorado Medicaid officials are building a minimum system for new federal work requirements and other eligibility changes before a Jan. 1, 2027, deadline. The changes could subject roughly 377,000 expansion adults to new reporting requirements and end coverage for about 7,000 lawfully present immigrants as early as Oct. 1, officials told the Commission on Medicaid on July 28.

The changes are part of the federal budget law known as HR1. The Centers for Medicare & Medicaid Services says states generally must operate the new community-engagement requirement by Jan. 1, 2027. Covered adults generally must complete 80 hours a month of work, community service, an approved work program, education or a combination of activities.

Colorado’s Department of Health Care Policy and Financing says the requirement will apply to about 375,000 members before exemptions. Children 18 and younger, adults 65 and older, American Indian and Alaska Native members, people in long-term services and supports or buy-in programs, and people who meet other federal exemptions will not be subject to it. HCPF staff told commissioners that about 47,000 people in the affected population are expected to qualify for exemptions.

Colorado plans to use self-attestation during the first year while it develops audit trails and verification systems. HCPF is adding data connections to automate exemptions where possible; staff said the joint eligibility system already contains some SNAP and TANF information. The state also must identify people who are medically frail. Staff said the federal rules require both a medically frail finding and a significant impairment that prevents a person from completing 80 hours of activity. Colorado is considering existing disability information and diagnoses to identify those exemptions.

County eligibility workers will need new training and procedures. HCPF said those materials were still being developed and that county funding was increased by $17 million over two years through an HR1 supplemental.

Immigrant coverage changes come first

A separate HR1 eligibility change is scheduled to take effect Oct. 1, according to HCPF. The department estimates about 7,000 lawfully present immigrants will lose Medicaid coverage, including people with refugee or asylum status, humanitarian parole and withholding of removal. HCPF said it had begun sending notices and planned additional formal notices and community outreach.

A community health center representative told commissioners that at least one-quarter and possibly one-half of the affected immigrants are already community health center patients or could seek care there if uninsured. The estimate was not accompanied by a public breakdown by clinic, county or hospital.

Financing changes will phase in

Colorado’s hospital provider fee is above the new federal safe-harbor limit, HCPF staff told commissioners. The Congressional Research Service’s summary of the law says the provider-tax threshold for expansion states will decline in stages, from 5.5% in fiscal 2028 to 3.5% in fiscal 2032 and later. Colorado legislative staff have described the state’s hospital fee as being phased down to 3.5% by fiscal 2031-32.

The change limits Colorado’s ability to use the hospital fee to draw federal Medicaid money. Commissioners and state staff warned that hospitals could face more uncompensated care and that costs could shift to private insurers. Legislative staff have said rural providers and hospitals could be affected, but the public record reviewed for this story does not identify which facilities or counties would face the largest losses.

Colorado is also awaiting federal action on a state-directed-payment proposal, another financing tool discussed at the meeting. Officials described the Jan. 1 system as a minimum viable product, with more verification and audit capacity expected later.