Trump’s New Spending Bill May Shrink Medicaid Coverage and Hike Insurer Costs

 

President Donald Trump’s proposed spending bill, the "One Big Beautiful Bill Act," could significantly impact the U.S. Medicaid system and the insurance companies that manage its plans. According to healthcare experts, the bill is expected to raise administrative costs for insurers like UnitedHealthcare, Aetna, Centene, and Molina while simultaneously shrinking Medicaid coverage. A key provision in the bill mandates that adults in states with expanded Medicaid must prove their work eligibility every six months to retain health coverage.

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This policy change would be burdensome for both state governments and insurers. States will need to implement complex verification systems with limited staff capacity, and insurers would likely face higher costs for managing enrollment, especially since sicker patients who are more likely to comply with the work verification could dominate the enrolled population. That shift could leave insurers with higher-risk members, worsening their cost structures.

For insurers like Centene and Molina, whose businesses are heavily reliant on Medicaid, the stakes are especially high. Experts believe many insurers will retreat from less profitable states and narrow their Medicaid focus to areas where they have existing infrastructure and higher margins. To offset the impact, insurers may redesign plans to make them more attractive to healthier individuals. These may include social incentives like transportation help, job search assistance, and community events.

However, this strategy could backfire financially in the short term, as additional services would raise administrative costs. As a result, states may also reduce how much they pay insurers per enrollee, exacerbating the profitability challenges.

The proposed Medicaid changes under Trump’s bill are projected to result in large-scale coverage loss. The Congressional Budget Office estimates up to 7.8 million people may become uninsured by 2034 due to these Medicaid revisions. Disenrollment would likely begin in 2027 and proceed on a rolling basis, according to state policy experts. The major concern is that verification procedures could become a barrier to access, especially for low-income Americans who may struggle to comply with the six-month work verification rule.

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Healthcare analysts suggest that while sick patients are more likely to remain enrolled due to their immediate needs, healthier individuals might be disenrolled more easily, leading to a more expensive, risk-heavy pool for insurers. That outcome could cause further financial strain on companies already struggling with low payment rates from state governments, which have not kept pace with the post-COVID cost of care.

Insurance companies are preparing for “another period of retrenchment,” where they scale back operations and avoid entering new markets. According to Jeff Jonas of Gabelli Funds, insurers will be more selective, sticking only to states where they can operate efficiently and profitably.

Insurers may also use creative methods to attract and retain healthy enrollees such as offering volunteer opportunities, job search tools, or educational resources in a bid to improve community engagement and reduce dropout rates. While these perks might be beneficial in the long term, they will add to short-term costs and strain operating budgets.

Experts believe this bill could usher in a new wave of healthcare inequality if enacted, disproportionately affecting low-income Americans while making Medicaid management costlier and more complicated for insurers. Despite its far-reaching impact, major insurers and the White House have so far declined detailed public comments.

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