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Blog

Fiscal 2027 State Budget Proposals: Provider Taxes, Medicaid Financing, and OBBBA Effects

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As of March 15, 2026, most governors had released proposed budgets for state fiscal year (FY) 2027. In addition, several governors in states that enacted biennial budgets in 2025 have released supplemental proposals. These FY 2027 state budget proposals signal how governors are responding to Medicaid financing changes, provider tax phase downs, and new implementation costs created in the  (P.L. 119-21, OBBBA). 

Given the requirement enacted in OBBBA, this year’s state budgets are more than spending plans. They are critical policy tools governors will use to navigate changes in federal funding, new program requirements, and increasing pressures across Medicaid and broader healthcare markets. 

The FY 2027 budgets indicate how governors are attempting to balance competing imperatives: maintaining healthcare coverage and access, stabilizing provider networks, financing Medicaid obligations, and aligning state healthcare and health-related programs with new federal rules. Healthcare provider taxes, revised funding priorities, and targeted funding proposals are key levers in the process of balancing budgets. 

şÚÁĎÍř Information Services (HMAIS) has published its final iteration of the  (subscriber access required), which examines proposed FY 2027 state budgets (January 22, 2026, A Look at Proposed State Fiscal Budgets). Our March 2026 issuance covers all proposed FY 2027 budgets for non-biennial budget states and some supplemental budget proposals for states that enacted biennial budgets in 2026. Following is a look at key trends in Medicaid proposals and some of the substantial budget proposals that are discussed within the report. 

Provider Taxes and Medicaid Financing Under OBBBA 

One notable fiscal federal policy change under OBBBA is the phase down of the Medicaid provider tax programs, a financing mechanism many states rely on to draw down federal matching funds and support provider payments. The federal law freezes existing provider tax programs, prohibits new ones, and requires Medicaid expansion states to phase down the minimum allowable tax rate from 6 to 3.5 percent by 2032. 

In addition, OBBBA places new limits on state-directed payments, capping them at 100 percent of Medicare rates for expansion states and 110 percent for non-expansion states. Grandfathered payment arrangements will be phased down by 10 percent annually beginning in 2028. 

FY 2027 state budget proposals highlight how these changes will have substantial and long-term fiscal impacts, even if some effects are delayed. Examples include: 

  • Arizona estimates it will receive $5.3 billion less in federal support between FY 2029 and 2033 as a result of policy changes. 
  • °ä˛ą±ôľ±´Ú´Ç°ů˛Ôľ±˛ąĚýprojects that state expenditures for Medi-Cal will grow $2.4 billion in FY 2027, largely because the Medical Provider Interim Payment expires in FY 2026 and a decrease in managed care organization (MCO)Ěýtax revenue available to support the Medi-Cal program. Gov. Gavin Newsom’s proposed FY 2027 budget assumes a transition period for the decreased MCO tax through December 31, 2026. 
  • Connecticut Gov. Ned Lamont’s proposed supplemental budget for the 2025–27 fiscal biennium calls for reducing hospital provider taxes by $275 million. Connecticut increased supplemental payments and provider taxes during the 2025 legislative session, but the governor’s proposal would reduce the inpatient hospital provider tax rate from 6 percent to 4.1 percent. 
  • Illinois projects that most of the budgetary impacts will begin in FY 2028, with federal Medicaid support reduced by approximately $2.8 billion annually by FY 2031. 
  • New York Gov. Kathy Hochul’s budget proposal updates the managed care tax spending plan and estimates the state will collect $1.5 billion fewer receipts than anticipated in fiscal 2027. 

Implementation Costs: Staffing, Systems, and Administrative Burden 

Along with the decreased federal funding, implementing OBBBA carries significant administrative and operational costs, compounding pressure on state budgets. 

According to an Associated Press  of 25 state budget protections, states will need to spend up to $1 billion in federal and state funds on technology upgrades and additional staff to fully implement the Medicaid work and community engagement requirements. Many FY 2027 budgets reflect this reality, with new investments focused on expanding staffing capacity and modernizing eligibility and data systems. For example:

  • ˛Ńľ±ł¦łóľ±˛µ˛ą˛Ô’s proposed budget, for example, includes $186.6 million from the state general fund to fully implement OBBBA, including $80.3 million in all funds to hire additional full-time employees who can meet the increased workload. 
  • Missouri proposes $294.6 million and dedicated staff members to comply with OBBBA. 
  • Arizona proposes a $14.4 million one-time investment and dedicated OBBBA implementation staff. 

Several governors also propose investments to help beneficiaries remain enrolled amid more frequent eligibility checks and new requirements. For example: 

  • Kentucky proposes $35.6 million in FY 2027 and $11 million in FY 2028 to modify the Medicaid information technology systems and other administrative systems to cover increased costs for the more frequent six-month eligibility redeterminations and to implement the new community engagement and work requirements. 
  • Rhode Island proposes $32.7 million for technology modifications to the RIBridges software to maintain compliance for various health and human services programs to align with OBBBA. 

What to Watch: FY 2027 Budget Decisions and Medicaid Financing Risks 

Upcoming provider tax phase downs and caps on state-directed payments constrain core funding tools just as implementation costs for staffing and systems are rising, forcing difficult decisions about coverage, provider support, and administrative capacity. Providers face growing uncertainty as tax supported supplemental payments are reduced or restructured, with potential implications for cash flow, service availability, and network participation. 

Managed care plans, meanwhile, must navigate shifting rate development assumptions, changes in provider payment arrangements, and increased enrollment churn tied to eligibility and redetermination changes. 

While the timing and magnitude of effects vary, these proposals underscore that provider tax and supplemental payment changes are more than abstract future concerns. They already are shaping FY 2027 budget decisions and long-term Medicaid financing strategies. 

Most state legislatures are still debating their spending plans, making it critical to track which proposals are included in FY 2027 budgets, which are scaled back, and which are eliminated. These budget decisions will play a central role in determining market stability, access to care, and program sustainability in the years ahead. 

HMAIS will publish additional reports in the coming months summarizing each state’s enacted budget. The first iteration is expected in May 2026. 

Connect with Us 

As the policy and funding landscapes continue to evolve, states and other stakeholders need to remain flexible. HMA brings the expertise, tools, and insights needed for stakeholders to stay on top of the rapidly changing environment. For questions or to connect with an HMA expert, contact Andrea Maresca and Kathleen Nolan. 

The full report is available to HMAIS subscribers. Questions can be directed to Maddie McCarthy. 

Blog

Connecting the Dots: Medicaid Community Engagement Requirements and State Readiness for 2027

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New federal Medicaid community engagement requirements, along with more frequent redetermination and a reduced retroactive eligibility timeframe, take effect January 1, 2027. These changes are reshaping state Medicaid policy agendas, budget decisions, and eligibility system design as states prepare to implement federally mandated work and community engagement requirements for the Affordable Care Act (ACA) expansion population. This blog addresses the forthcoming policy changes, key issues related to eligibility and information systems, and timely actions for state partners preparing to meet the new requirements.

Community engagement requirements often are discussed in broad terms: whether they encourage self-sufficiency or create barriers. For state Medicaid agencies, managed care plans (MCPs), and providers, however, the more immediate and consequential question is operational: Is the Medicaid program—across eligibility systems, data flows, partner roles, and communications—ready to administer these requirements without losing eligible people? 

Based on our work with states, Medicaid programs, and community partners, the answer is dependent on the approach to execution. Specifically, it hinges on how states prepare their systems and partners for compliance with community engagement requirements without placing undue burden or expectations on beneficiaries, government agencies, MCPs, and community partners. 

Federal Context: Medicaid Community Engagement Requirements Beginning in 2027 

Under , states that extended Medicaid to able‑bodied adults in the ACA Medicaid expansion population (up to 138 percent of the federal poverty level) must: 

  • Apply community engagement requirements to expansion adults, unless they qualify for an exemption 
  • Conduct eligibility redeterminations at least every six months for these enrollees 
  • Reduce retroactive coverage eligibility from 90 to 30 days 
  • Verify community engagement or exemptions using available data sources 
  • Enforce consequences for noncompliance beginning in 2027 

Forthcoming federal guidance and regulations will clarify key implementation details. In the interim, states are using the statutory framework to design the necessary policy changes. For example, many states will move beyond a simple “requirement” model toward support-oriented programs that make compliance achievable for enrollees, minimizes administrative churn, and leverages available data and information systems functionality to reduce compliance burden. In so doing, states need to use existing federal guidance to answer the following questions: 

  • Who is in scope and who is exemptĚý˛ą˛Ô»ĺĚýhow are exemptions verified without creating new burdens on enrollees and the people and systems that support them? 
  • What counts as a “qualifying activity” for compliance with the community engagement requirement (e.g., education/training and caregiving)? 
  • Which data sources can be deemed as “authoritative” for verifying compliance? 
  • How and when will beneficiaries be notified, supported, and given opportunities to supply missing information? 
  • How do they track compliance with the community engagement requirementĚý˛ą˛Ô»ĺĚýaddress its intended and unintended impacts? 
  • How do the verify eligibility for new applicants and what process do they use to monitor ongoing compliance for existing enrollees? 

Analyis and planning for community engagement is underway now, state by state, and will determine whether the mandates will increase employment, education, and volunteerism and yield the expected healthĚý˛ą˛Ô»ĺĚýeconomic benefits or drive avoidable coverage loss. 

From Policy Requirement to Workable Medicaid Community Engagement Implementation 

The  touch multiple components of a Medicaid enterprise, including: 

  • Eligibility and enrollment systems and renewal workflows 
  • Data sources (wage databases, SNAP/TANF interfaces, workforce systems, education/training records)Ěý
  • Managed care member services and, potentially, capitated payments 
  • All engagement with contact centers (e.g., phone, chat, text messaging, email, beneficiary portal, etc.)Ěý
  • Document processing 
  • Notices, appeals, fair hearing processes, and case management 
  • Reporting, audit trails, and quality assurance 

In other words, the backend systems that support compliance with the community engagement requirement must be designed and built for real-world administration and meet oversight requirements. Backend system readiness is among the most important operational issues for expansion states, as it will dictate the overall timeline and success in meeting Medicaid leaders’ goals. 

How Medicaid MCPs and Providers Will Support Enrollees 

The Centers for Medicare & Medicaid Services (CMS) collaborated with  to meet the compressed community engagement implementation timeline, the scale of system changes required across eligibility and verification workflows, and long-standing cost and capacity constraints. States are being asked to implement these complex new expectation largely within existing eligibility platforms, which were designed for purposes other than continuous activity tracking or cross-agency data exchange. 

Although these arrangements may improve affordability and speed, states must still assess whether vendor-offered solutions align with their specific policy choices, data sources, partner roles, and operational risk tolerance. 

Medicaid MCPs and provider groups, including hospitals and federally qualified health centers (FQHCs), will be on the front lines of enrollee retention. These organizations should engage with states now to ensure systems and information flows support their work. MCPs should focus on access to: 

  • Timely actionable information regarding which members are subject to the requirement 
  • Visibility into exemption status and pending verification 
  • Clear rules and data feeds that support proactive outreach 
  • Alignment on plan member communications 

Primary care providers, hospitals, FQHCs, and behavioral health providers play a critical role in identifying and supporting exemptions. If the exemption processes are slow, unclear, or burdensome, patients with legitimate medical or functional limitations may lose coverage and providers may incur increased uncompensated care costs. Providers should be engaging states to solidify: 

  • Streamlined, clinically grounded exemption processes 
  • Clear guidance on documentation standards 
  • Fast, predictable exemption determinations 
  • Feedback loops when exemption requests are denied or incomplete 

Community engagement requirements will require coordination with nontraditional partners, such as: 

  • Departments of Labor/Workforce Development 
  • Community colleges, adult education, and training programs 
  • SNAP/TANF agencies (and their employment and training programs)Ěý
  • Community-basedĚý˛ą˛Ô»ĺĚýfaith-based organizations, organizations that offer volunteer and community service opportunities, and local workforce boards 
  • Employers, chambers, and sector-based workforce intermediaries 

These partners can become essential to making the policy workable for enrollees, but they often have timelines, data standards, funding streams, and performance incentives that differ from Medicaid’s. Partners should be in conversation with states now about investments in a cross-agency and cross-sector governance structure that answers practical questions about the definitions, systems and workflows, and beneficiary experience. 

States Should Act Now 

A real and preventable risk is embedded in the 2027 timeline: coverage loss among healthy, working adults who remain eligible but cannot navigate new processes. States must look across every part of their Medicaid system, decide what they need each partner to do, and ensure those partners have the information, tools, and authority to act. Plans and providers must be clear and advocate for what they need to prevent eligible individuals from losing coverage. 

Handled well, this is an opportunity to modernize systems, strengthen cross-sector coordination, and may demonstrate whether community engagement can yield a net benefit to members—not just add steps to maintaining coverage. 

Connect with Us 

HMA Medicaid experts assist Medicaid and state policymakers with the following: 

  • Policy-to-operations design 
  • Cross-agency governance and partner alignment 
  • Information systems impact assessment, change planning, testing strategies and readiness metrics 
  • Scenario planning and beneficiary impact analysis 
  • Communications and operational playbooks 
  • Program integrity, reporting, and audit support 

HMA contributors to this article include Erin Dorrien, Kaitlyn Feiock, Andrea Maresca, and Juan Montanez. 

HMA Blog Series 

The şÚÁĎÍř (HMA) Connecting the Dots blog series brings our experts together to examine the major policy, program, and market forces shaping healthcare coverage, delivery systems, and financing in 2026. The posts look beyond individual changes to connect emerging developments across programs and markets to help leaders understand what’s changing, why it matters, and how their decisions shape the path ahead. This month our experts weigh in on preparations for Medicaid Work and Community Engagement Requirements.  

Blog

PBM Reform Accelerates: New Rules, Broader Oversight, and What’s Ahead

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The first quarter of 2026 marked a turning point in federal oversight of pharmacy benefit managers (PBMs), the intermediaries that manage prescription drug benefits for most health plans across the commercial insurance market, Medicare Part D, and other programs. New legislation, agency rulemaking, and enforcement activity collectively signal a new phase of oversight that could materially reshape PBM contracting, compensation, and transparency requirements. 

Most notably, the following developments stand out: 

  • The US Department of Labor (DOL)Ěý new disclosure requirements for PBMs that serve self-insured Employee Retirement Income Security Act (ERISA)Ěýplans. 
  • The Consolidated Appropriations Act of 2026 (CAA 26),  February 3, 2026, establishes comprehensive PBM transparency and contracting requirements in the commercial insurance market and Medicare Part D. 
  • The Federal Trade Commission (FTC)Ěý a settlement with Express Scripts, Inc. (ESI), requiring significant changes to ESI’s business practices. 

Together, these actions signal a trend toward greater PBM accountability, with implications for plans, pharmacies, manufacturers,Ěý˛ą˛Ô»ĺĚýconsumers. This article provides a high-level overview of the major recent developments in the PBM reform policy landscape, along with key considerations for stakeholders. 

Medicare Part D: Key Statutory Changes 

Beginning in plan year 2028, CAA 26 makes significant changes for PBMs operating in Medicare Part D. Key provisions include: 

  • Requiring PBMs to provide annual reports to plan sponsor clients detailing aggregate and drug-specific costs 
  • Restricting PBMs compensation structures, prohibiting payments tied to drug prices, rebates, or price-based benchmarksĚý˛ą˛Ô»ĺĚýlimiting PBMs to only receive bona fide service fees that reflect fair market value 
  • Stipulating additional parameters related to rebate guarantees, contract terminology, and audit rights 

Additional provisions that will take effect in beginning with plan year 2029 include: 

  • A requirement that plan sponsors and PBMs comply with forthcoming standards for “reasonable and relevant” pharmacy contracting terms and conditions 
  • Expansion of the enforcement infrastructure to avert potential violations of the program’s pharmacy contracting requirements 

Key considerations: The Centers for Medicare & Medicaid Services (CMS) has broad discretion in implementing these provisions, including setting pharmacy contracting standards, determining which PBM affiliates are subject to new requirements, and defining “fair market value.” PBMs will face expanded reporting and compliance obligations, while plans and other stakeholders will have opportunities to shape implementation through the regulatory process. 

Commercial Health Insurance Market: Key Statutory Changes 

For the commercial market, CAA 26 establishes similar transparency requirements for PBMs that serve fully insured and self-insured plans, with reporting required up to four times per year. Unlike Medicare Part D, the statute does not prohibit pricelinked compensation in the commercial market, but it does require detailed disclosure of PBM fees and revenue streams. For contracts with selfinsured plans, PBMs must remit 100 percent of rebates and fees tied to drug utilization, subject to specified limitations. 

Key considerations: These provisions significantly expand federal oversight in the commercial market. PBMs will need to scale compliance infrastructure, while employers and other plan sponsors may seek enhanced analytical and actuarial support to interpret disclosures and assess PBM performance. 

Medicaid Left Out, For Now. 

Unlike prior , CAA 26 does not include Medicaid-specific PBM reforms, such as  on spread pricing (i.e., a PBM charges a payer more than the amount it pays the dispensing pharmacy for a prescription) and expanded National Average Drug Acquisition Cost () reporting. 

Key considerations: These policies continue to have Ěý˛ą˛Ô»ĺĚýcould reemerge in legislation. States, PBMs, and managed care plans should continue monitoring for renewed federal action on these policies. 

DOL’s Proposed PBM Fee Disclosure Rule 

DOL’s proposed , â€śImproving Transparency Into Pharmacy Benefit Manager Fee Disclosure,” would require PBMs serving self-insured ERISA plans to  information about rebates, manufacturer fees, pharmacy payments, and spread pricing. In late February, DOL  the public comment period to April 15 to allow stakeholders to address how the proposed rule should align with the newly enacted CAA 26 provisions. 

Key considerations: DOL could withdraw the proposal in favor of the statutory framework or could finalize the rule to take effect before the CAA 26 requirements begin. Either path would further increase near-term compliance for PBMs and plan sponsors, and stakeholders should monitor this space closely. 

FTC Settlement with ESI 

°Őłó±đ&˛Ô˛ú˛ő±č;ąó°Ő°ä’s&˛Ô˛ú˛ő±č; with ESI resolves insulin-focused  against the PBM and imposes extensive requirements related to transparency, compensation, rebates and fees, and benefit design. The settlement also includes less common provisions, such as a commitment to reshore and increase disclosures related to ESI’s rebate group purchasing organization (GPO) functions. 

Key considerations: If similar settlements are reached with other PBMs, the FTC could play an expanded role in shaping PBM market behavior, supplementing legislative and regulatory reforms with enforcement-driven standards. 

State Efforts to Regulate PBMs 

States continue to pursue PBM reforms, with  of laws enacted in recent years addressing licensure, reporting, pharmacy reimbursement, and contracting standards. Although the Supreme Court’s 2020  in Rutledge v. PCMA opened the door to certain state-level reforms,  have narrowed the scope of permissible state regulation, particularly when ERISA preemption or Medicare Part D conflicts arise. 

Key considerations: Stakeholders operating across multiple markets and states will continue to face a complex and evolving patchwork of requirements, underscoring the importance of ongoing policy tracking and compliance coordination. 

Connect with Us 

Recent federal and state actions suggest that PBM reform is entering a more operational phase defined by transparencyĚý˛ą˛Ô»ĺĚýenforceable standards governing compensation, contracting, and market behavior. As implementation unfolds, stakeholders across the prescription drug supply chain will need to engage closely with regulators, assess new data flows, and adapt their business practices to a more prescriptive oversight environment. 

For more information about the policies described in this article and the PBM policy landscape more broadly, please contact our experts  or Stephen Palmer. 

Blog

Outlook 2026: What CMS’s Proposed 2027 NBPP Signals for ACA Marketplaces, States, and Consumers

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The Centers for Medicare & Medicaid Services (CMS) proposed  marks a notable shift in Marketplace policy, expanding lower premium plan options, relaxing certain federal standards, and moving more implementation and oversight responsibility to states and Marketplaces. It also introduces eligibility and verification policies that could significantly affect enrollment, operations, and market stability. 

To unpack what this could mean for plan year 2027 and beyond, Andrea Maresca spoke with Zach Sherman, Managing Director for Coverage Policy and Program Design at şÚÁĎÍř (HMA); Lina Rashid, Principal at HMA; and , PhD, Principal at Wakely, an HMA company, who, alongside colleagues, published a Policy Brief on state-level and consumer impacts, as well as a Wakely  on the proposed rule. 

 Q: When you zoom out from the technical details, what are the big takeaways from the proposed 2027 NBPP for states, consumers, and issuers? 

Lina Rashid: At a high level, the proposal reallocates risk and responsibility across the system. Consumers may see more lower premium options through expanded catastrophic plan eligibility and more flexible bronze plan design, but often with more cost-sharing, higher deductibles, or greater complexity. For consumers, affordability is about more than just premiums; it’s about how much healthcare costs for individuals and their families overall and the cost of care when they need it. 

States are being given options to take on more oversight and operational responsibility but without additional federal funding. And issuers are being given more flexibility, but it comes with uncertainty regarding enrollment and risk mix. 

Zach Sherman: The rule’s cumulative effect matters more than any one policy. Expanded catastrophic eligibility, higher out-of-pocket exposure, relaxed network standards, and tighter verification requirements all interact. Together, they raise questions about access, affordability, and whether Marketplaces are equipped to manage administrative and enrollment disruption. 

Q: The paper highlights potentially significant enrollment effects. What’s driving that dynamic? 

Michael: Two things stand out. First, the proposal implements statutory changes that remove advance premium tax credit (APTC) eligibility for certain lawfully present immigrants beginning in 2027. CMS estimates more than a million people could lose eligibility, and it’s reasonable to expect most of them will exit the individual market. 

Second, the proposed income verification changes could generate millions of data matching issues (DMIs) that temporarily or permanently cut off access to advance premium tax credits. While CMS projects a relatively modest disenrollment effect, our analysis suggests losses could be meaningfully higher depending on how quickly issues are resolved. We estimate that approximately 4.7 million enrollees could receive DMIs under the proposal, and upward of 80 percent of them could temporarily or permanently lose access to APTCs, putting coverage at risk. 

Zach: If consumers can’t afford the full premiums while resolving a data issue, many will drop coverage. That creates churn and administrative strain that Marketplaces must manage. 

Q: How do these policies affect state Marketplaces and regulators specifically? 

Zach: States are being asked to do more across multiple fronts. Network adequacy oversight is shifting toward states that conduct effective rate review. States may also choose or feel pressure to take on Essential Community Provider (ECP) review authority, including for new non-network plans. Accepting that responsibility requires legal authority, staff capacity, and technical infrastructure. 

At the same time, states may need to stand up the State Exchange Improper Payment Measurement (SEIPM) program, which CMS acknowledges will increase administrative burden. 

The proposed State Exchange Enhanced Direct Enrollment (SBE-EDE) option is also a significant shift. Rather than operating a centralized consumer enrollment platform, Marketplaces would focus on certifying, overseeing, and monitoring multiple third-party entities. As a former director of a state-based Marketplace program, I know this is a fundamentally different operational posture that comes with oversight and compliance costs. 

Q: The proposal also introduces non-network plans. What should stakeholders be watching here? 

Michael:  may offer lower premiums, but they change how access works. Provider participation depends on the willingness to accept the plan’s payment as payment in full. On paper a plan may meet access standards, but in practice consumers could face difficulty finding care. That places additional oversight responsibility on states to determine whether access is sufficient in practice. If aggressively priced non-network plans disproportionately attract healthier enrollees, it can create financial risk for issuers and for the broader market. 

Q: What does this mean for market stability going forward? 

Zach: Stability will vary by state. States that invest in oversight, consumer assistance, and operational readiness—often a state-based Marketplace—may be better positioned to manage these changes. Others may see sharper enrollment declines or access issues. That divergence across states is an important signal from this proposal. 

Q: What should states and stakeholders be doing right now? 

Zach: States should be doing scenario planning, assessing which flexibilities to adopt, where to maintain higher standards, and whether they have the capacity to take on expanded responsibilities. These decisions will shape how the rule plays out on the ground. 

Michael: Issuers should be , risk adjustment exposure, and operational readiness. All stakeholders should remember that comments on the proposed rule are due March 13, 2026. 

ł˘ľ±˛Ô˛ą:ĚýNotably, CMS is not done with regulatory reforms. The agency solicited comment on medical loss ratio (MLR)ĚýpoliciesĚý˛ą˛Ô»ĺĚýpaused Essential Health Benefit benchmark updates, as well as issues not covered in this proposed rule, such as revisions to the Section 1332 waiver and Section 1333 interstate compacts. States and issuers should be tracking what may come next, not just what’s in this proposal.

HMA Weekly Roundup

March 11, 2026

Outlook 2026: What CMS’s Proposed 2027 NBPP Signals for ACA Marketplaces, States, and Consumers

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Brief & Report

2027 Proposed NBPP: Analyzing State and Consumer Impacts

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On February 9, 2026, the Department of Health and Human Services (HHS) released the proposed Notice of Benefit and Payment Parameters (NBPP) for 2027. The notice includes important proposed rules and parameters for the operation of the individual and small group health insurance markets in 2027 and beyond.

This paper summarizes key provisions in the proposed notice with a focus on the major changes to plan types, cost-sharing, network design and oversight, marketplace philosophy, and the shift of responsibilities from the federal government to states. It also evaluates any changes to returning policies from the Marketplace Affordability and Integrity rule from last year, which are currently being challenged in court, and codifies relevant statutory changes in the One Big Beautiful Bill Act.

The paper reviews the potential impact of these proposed policies on consumer affordability and access as well as the impact and associated level of effort on state regulators and marketplaces. Lastly, it touches on policies not included in this rule, including those highlighted as issues that may or will be addressed in future rulemaking as well as issues surprisingly not covered in this proposed rule, such as revisions to the Section 1332 waiver process as well as details on how a state could explore and pursue a 1333 interstate compact. Comments are due no later than March 13, 2026.

Blog

Strategies to Address Fraud, Waste, and Abuse in Non-Emergency Medical Transportation

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Fraud, waste, and abuse (FWA) in Medicaid non-emergency transportation (NEMT) remain a persistent challenge for state Medicaid programs and health plans because of the scale and complexity of the benefit. NEMT is a critical, mandatory benefit intended to ensure eligible Medicaid beneficiaries without reliable transportation can get to necessary medical appointments. Numerous investigations and audits, however, have revealed that some transportation providers bill for trips that never occurred, inflate mileage, fabricate tolls, or even recruit patients with kickbacks to generate fraudulent claims, diverting limited program funding away from legitimate care needs.

The NEMT benefit represents a small share of Medicaid costs—estimated at around 1 percent of total Medicaid spending. With the codification of NEMT as a required benefit in 2020, market analysts forecast NEMT will grow considerably, nearly doubling in market size from 2021 to 2028.

Comprehensive, nationwide estimates specific to NEMT FWA are limited. Federal and state audits like those in , , and , however, have uncovered millions of dollars in claims that did not comply with federal and state requirements, underscoring systemic vulnerabilities in oversight and documentation. For example, a 2022 federal audit of New York Medicaid NEMT found an estimated $84 million in unallowable federal reimbursements and another ~$112 million that may not have complied with requirements over two years.[1]

Furthermore, individual criminal cases have involved schemes of $1 million to more than $2 million in falsely billed transportation services. Isolated settlements and audits indicate that fraud and abuse can be substantial locally even if we lack a clear, reliable national aggregate estimate.

A 2025 report by şÚÁĎÍř (HMA) about NEMT contracting approaches found an opportunity for states and health plans that administer non-emergency transportation to leverage technology and require or incentivize new strategies to improve program integrity and quality in NEMT going forward. Some of the identified strategies to address FWA include:

  • Adopting or requiring digital solutions—such as GPS trip verification, electronic visit logs, and real-time data analytics—to detect irregular billing patterns before claims are paid, replacing outdated paper logs and manual reconciliations that were prone to error and exploitation.
  • Focusing trip verification efforts on standing orders (pre-approved authorizations often for repeated treatments), given that they comprise the largest share of trips and are often vulnerable to fraud.
  • Positioning and educating medical facilities to be critical partners in preventing FWA by confirming appointment attendance, either via phone or signature on the trip log.
  • Automating mileage reimbursement (for enrollees who drive themselves or are driven by family members or friends) through a mobile app, which enabling riders to schedule and track their trips and submit claims quickly while allowing NEMT brokers to verify the mileage using GPS. This system would also allow brokers to better target their anti-fraud efforts, such as requiring additional documentation only for higher reimbursement amounts.

Since the publication of that report, several state Medicaid programs have issued NEMT procurements that maintain a strong emphasis on preventing FWA. For example, the 2025 Wisconsin NEMT RFP included provisions to promote greater collaboration between the Wisconsin Department of Health Services (DHS) Office of Inspector General (OIG) and NEMT broker, including “quarterly and ad hoc meetings to discuss open complaint investigations, red flag patterns, and establish safeguards for ongoing or suspected fraud, waste, and abuse” and imposed penalties for fraud incidents that go undetected by the broker.

FWA in Medicaid NEMT may represent a fraction of overall program spending, but the consequences are outsized: Every improper payment diverts resources away from beneficiaries who depend on transportation to access essential care. As states, health plans, and NEMT brokers modernize contract requirements, strengthen oversight, and embed technology-driven verification into their contracts and operations, the focus is shifting from retrospective recovery to proactive prevention, transparency, and accountability in transportation services.

Continued collaboration among Medicaid agencies, brokers, medical providers, and oversight entities will be critical for sustained progress. By pairing smarter contracting with real-time data tools and clear accountability, states and Medicaid health plans can better safeguard public dollars while ensuring that NEMT remains a reliable lifeline for the people it is designed to serve.

Learn more about how HMA Helps NEMT Stakeholders Overcome Challenges. If your organization is ready to talk about how HMA can help advance your NEMT goals, please contact one of our experts below.

Related Resources:

[1] US Department of Health and Human Services, Office of Inspector General. New York Claimed $196 Million, Over 72 Percent of the Audited Amount, in Federal Reimbursement for NEMT Payments to New York City Transportation Providers That Did Not Meet or May Not Have Met Medicaid Requirements. September 12, 2022. Available at: .

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The Value Shift in Medicare Advantage: What 2026 Benefits Tell Us şÚÁĎÍř the Market’s Next Chapter

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The Medicare Advantage (MA) program continues to evolve as plans respond to shifting policy signals, market pressures, and beneficiary expectations. A new paper from Wakely, an HMA Company——provides a data-driven examination of how MA benefit designs are changing and what those changes signal about the future direction of the program. 

This paper refreshes Wakely’s ongoing MA , updating  with the latest 2026 plan enrollment data. It builds on Wakely’s established work examining benefit design, supplemental offerings, and the relationship between bids, rebates, and plan value, including . 

This article highlights findings from the proprietary value-add metric that Wakely developed to provide a comprehensive assessment of MA plan value. Although it can be used as a comparative metric to evaluate relative changes year over year, it is not intended to represent pricing. 

From Benefit Expansion to Optimization 

Over the past decade, MA plans have steadily expanded benefit offerings, supported by strong enrollment growth and favorable rebate dynamics. The 2026 benefit landscape suggests that plans have been taking a more measured approach (see Figure 1). Wakely’s analysis finds that plans are becoming more strategic in how benefits are designed and deployed, maintaining or enhancing benefits that are best aligned with quality performance, affordability, and target populations while pulling back in other areas. 

Plans appear to be optimizing benefits to better align with member needs, quality performance, and financial parameters. Examples include refining supplemental benefits, adjusting cost-sharing structures, and rethinking how benefits support care management and health outcomes. 

Figure 1. Change in Plan Value-Add from 2025 to 2026

 The shift reflects an MA market in which differentiation and long-term sustainability are increasingly important. 

Supplemental Benefits: More Targeted, More Strategic 

Supplemental benefits remain a defining feature of Medicare Advantage, but their role is evolving. Wakely’s paper highlights a move away from expanding the number of benefits toward targeted benefit offerings that are more clearly connected to member engagement and outcomes. 

Plans are homing their focus on benefits that support daily living, chronic condition management, and access to care, particularly for populations with higher needs. This targeted approach suggests plans are thinking about value, operational complexity, and how benefits contribute to overall value propositions. 

Between 2025 and 2026, the percentage of members with access to common supplemental benefits has, on average, stayed consistent or slightly decreased among the general enrollment population (Figure 2). The percentage of members who are enrolled in plans that offer over-the-counter (OTC) drug, transportation, and Flex Card benefits has decreased by 11 percent, 6 percent, and 4 percent, respectively. Conversely, the Dual Eligible Special Needs Plan (D-SNP) population saw an increase in member access to all supplemental benefit categories except transportation (an 8% decrease). 

Figure 2. Percent of Enrollment in Common Supplemental Benefits 

For stakeholders across the healthcare ecosystem, this trend underscores the importance of understanding not just what benefits are offered, but why. 

Shifts in Cost Sharing and the Enrollee Experience 

Wakely’s analysis also points to notable shifts in cost sharing and premium structures. There is continued attention to balancing affordability for members with the need to manage plan liability amid changing benchmarks and utilization patterns. 

These decisions directly affect the member experience. Small shifts in copays, deductibles, or benefit limits can influence enrollment, retention, and satisfaction, particularly in competitive markets. As plans fine tune these levers, data-driven insights become critical to understanding how benefit changes may resonate with different member segments. 

2026 Signals for Future Bid Cycles 

The benefit trends identified in â€śThe Value Shift” series suggest several broader signals for the MA market: 

  • Value over volume: Plans are prioritizing benefits that support quality, outcomes, and sustainable growth. 
  • Greater segmentation: Benefit designs are increasingly tailored to specific populations and market dynamics. 
  • Data-informed decision-making: As margins tighten, plans are relying more heavily on analytics to guide benefit strategy. 
  • Special needs plans continue to drive growth. Enrollment in Chronic Condition Special Needs Plans (C-SNPs)Ěýis the fastest-growing segment in MA. 

These dynamics have implications for MA organizations and for providers, policymakers, and partners seeking to understand how MA continues to shape care delivery and costs. 

Value-Add Metric and Benefit Design Insights 

In this paper, Wakely paired its actuarial and analytic expertise with tools that enable detailed benefit and market analysis. One of those tools, Wakely’s  (WMACAT), calculates a comprehensive value-add metric that integrates five core components into a consistent framework that allows for apples-to-apples comparisons across plans, markets, and years. In addition, Wakely’s  (SMART) supports broader competitive assessments by layering enrollment weighting, geographic variation, and plan positioning into the analysis. 

As an HMA company, Wakely’s work is complemented by broader policy, market, and strategy expertise, helping organizations connect benefit decisions to regulatory developments, operational considerations, and long-term goals. 

For health plans and healthcare organizations navigating the next phase of Medicare Advantage, these combined capabilities can respond to questions such as: 

  • How competitive is our benefit design today, and where are the risks? 
  • Which benefits are most aligned with our population and quality strategy? 
  • How might future policy or payment changes affect benefit sustainability? 

Looking Ahead 

MA benefit design remains an important signal of market direction by showing how plans are responding to policy change, market competition, and financial pressure. As plans shift from broad expansion to more targeted value strategies, the ability to measure, compare, and interpret benefit changes becomes essential as plans look ahead to the 2027 and 2028 bid cycles. 

Wakely will continue to build on this work with upcoming analyses, including deeper dives into Part D design changes and the implications of the sunset of the Value-Based Insurance Design (VBID) program. 

For information about this analysis and the Wakely tools, contact  and . 

HMA Weekly Roundup

March 4, 2026

The Value Shift in Medicare Advantage: What 2026 Benefits Tell Us şÚÁĎÍř the Market’s Next Chapter

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2027 NBPP Proposed Rule Signals Further Marketplace Changes

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The Centers for Medicare & Medicaid Services (CMS)Ěý proposed rule, published February 11, 2026, arrived at a pivotal moment for the Affordable Care Act (ACA)ĚýMarketplaces. The temporary enhanced premium tax credits (ePTCs), first expanded in 2021 and extended through 2025, expired at the end of last year, returning Marketplace subsidies to their original ACA structure in 2026. As we discussed in earlier articles (hereĚý˛ą˛Ô»ĺĚýhere), that shift is already affecting affordability, plan selection, and enrollment dynamics—particularly for consumers who are ineligible for premium assistance. 

The proposed 2027 NBPP represents a significant reset for the Marketplace, reflecting CMS vision and policy priorities to strengthen program integrity while expanding plan design flexibility and consumer choice as a pathway to affordability, as well as policies to defer to state authority. Healthcare organizations and other interested stakeholders may submit comments on the proposed rule through March 13, 2026. 

The remainder of this article addresses the key policy proposals and considerations for issuers, states, and consumer groups. 

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The proposed NBPP for 2027 sets standards for the Exchanges and ACA-compliant individual and small group markets and updates payment parameters for risk adjustment and risk adjustment data validation (RADV). The rule also implements changes approved under the , (P.L. 119-21, OBBBA) and includes a range of policies spanning plan certification, eligibility and verification, and Exchange oversight. 

Expanded Plan Design Flexibility 

CMS proposes to discontinue standardized plan options in the Federally-facilitated Marketplace (FFM) and remove limits on the number of non-standardized plans offered by issuers on the FFM and state-based Marketplaces on the federal platform (SBE-FPs). Issuers would be permitted to decide whether to discontinue existing standardized or chronic condition plans or continue them with modified cost sharing. 

Considerations: This change is designed to allow greater innovation in plan design. It also raises questions about the potential return of a more complex Marketplace shopping experience for consumers who will have to shift through more plans. 

Certification of Non-Network QHPs 

One of the most consequential proposals would allow â€śnon-network” plans to be certified as qualified health plans beginning in 2027. These plans would not rely on contracted provider networks. Instead, they would set benefit payment amounts and require issuers to demonstrate that sufficient providers—including Essential Community Providers (ECPs) and mental health and substance use disorder providers—are willing to accept those amounts as payment in full. 

Considerations: CMS positions non-network plans as a way to create lower premium options. For states and issuers, this proposal introduces new oversight and operational considerations related to access standards, consumer protections, the risk of balance billing or access gaps for consumers, and potential market instability. 

Changes in Catastrophic and Bronze Cost Sharing 

The proposed rule would further expand access to catastrophic plans by codifying hardship exemptions for individuals ineligible for advance premium tax credits (APTCs) or cost-sharing reductions (CSRs) because of projected income. CMS also proposes to allow multiyear catastrophic plans with contract terms of up to 10 consecutive years. In addition, CMS proposes new flexibility for certain bronze plan designs in the individual market. In both cases, CMS proposes to allow catastrophic and bronze plans to exceed the annual maximum out-of-pocket limit. 

Consideration: These policies reflect CMS’s emphasis on affordability through lower premiums and expanded consumer choice, while shifting more financial risk to enrollees through higher cost sharing. 

Network Adequacy and Essential Community Providers 

CMS proposes to give states greater discretion in provider access for network adequacy and ECP certification reviews, including allowing federally funded exchange (FFE) states to conduct their own reviews if CMS determines they have sufficient authority and technical capacity. CMS also proposes to reduce the minimum percentage of ECPs that issuers must include in their networks from 35 percent to 20 percent. 

Considerations: These changes reduce federal prescriptiveness and could lower issuer compliance costs but also place more responsibility on states to monitor access and ensure that vulnerable populations are not adversely affected. 

Essential Health Benefits and State Mandates 

The proposed rule would prohibit issuers from including routine non-pediatric (adult) dental services as an Essential Health Benefit (EHB). More significantly for states, CMS proposes changes to cost defrayal requirements for state-mandated benefits, requiring states to cover the cost of benefits considered “in addition to EHB” under specified criteria, even if those benefits are embedded in the state’s EHB benchmark plan. 

Consideration: These changes could have direct budgetary implications for states, pricing implications for issuers, and could stunt or potentially decrease benefits for consumers. 

Program Integrity and Increased Eligibility Verification 

CMS includes a robust set of program integrity provisions, including: 

  • Strengthened standards for agent, broker, and web broker marketing practices 
  • Required use of a US Department of Health and Human Services (HHS)-approved consumer consent and application review form 
  • Codification of  policies and reintroduction of  provisions not previously implemented, including expanded special enrollment period (SEP) verificationĚý˛ą˛Ô»ĺĚýincreased eligibility standards for enrollees applying for APTCs (see Navigating CMS’s 2025 Marketplace Rule: What It Means for ACA Marketplaces, Insurers, and Consumers)Ěý
  • Implementation of the State Exchange Improper Payment Measurement (SEIPM) program for state-based Marketplaces 

Consideration: These policies continue CMS’s heightened scrutiny of enrollment activity and subsidy eligibility. CMS’s policies are likely to increase data matching issues (DMIs), which could increase burden on Marketplaces and enrollees, resulting in reduced enrollment. 

Preparing for Policy Driven Changes in ACA Marketplaces 

The 2027 NBPP underscores a clear policy shift away from extending federal subsidies toward advancing a Marketplace framework that emphasizes program integrity, state flexibility, and expanded plan design options as mechanisms to promote affordability and consumer choice. 

The proposed rule sets the stage for significant strategic and operational decisions for issuers and states ahead of the 2027 plan year. şÚÁĎÍř (HMA), including Wakely, an HMA company, works with issuers modeling enrollment and risk shifts and to assist in pricing decisions. States also should consider the need for new strategies and approaches to adapt to federal policy changes that are expected for ACA Marketplace programs. 

For more information about the policies described in this article, support with scenario-based modeling of enrollment and data-informed strategy development for 2027 and beyond, please contact our experts , Lina Rashid, or Zach Sherman. 

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Outlook 2026: Medicare Advantage Advance Notice—What It Means for the 2027 Market

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In this conversation, Andrea Maresca, Senior Principal at şÚÁĎÍř (HMA), caught up with , Director, Wakely, and , Co-Founder & Managing Partner at Health Transformation Strategies, LLC, to unpack the biggest questions emerging from the Calendar Year (CY) 2027 Medicare Advantage (MA) and Part D Advance Notice. Of particular interest was the Centers for Medicare & Medicaid Services’s (CMS’s) proposed risk adjustment and diagnosis source changes, which are drawing significant attention across the industry. 

Q: The headline is “flat” payments. How should the market interpret CMS’s projected rate change? 

Tim Courtney: CMS  a net average payment change of just +0.09 percent for CY 2027—about $700 million (M). The effective growth rate is about 4.97 percent, but it’s largely offset by risk model and normalization changes and the proposed diagnosis source policy. 

Jon Blum: Exactly. It’s important to note that CMS’s impact projections are based on the change in its average payments. Its proposed policies will have much more far-reaching distributional impacts, depending on the diagnoses of their enrolled members. At the same time CMS recently proposed changes to its Star Ratings methodologies. Over time, we could see quite significant changes to the balance of Medicare Advantage payments distributed across the country that could significantly affect benefit offerings and premium amounts. 

Q: What’s most surprising in the Advance Notice for 2027? 

Blum: The diagnosis source tightening is the big one. CMS proposes excluding diagnoses from “unlinked Chart Review Records” from risk score calculation starting in CY 2027. That signals a continued progression by the agency toward encounter-anchored data integrity. Assuming this policy is finalized, Medicare Advantage plans must continue to invest in systems to respond to CMS’s program integrity focus. 

Courtney: And it’s not only chart review. CMS also proposes excluding diagnoses from audio-only services for Part C and similarly for Part D. Operationally, that’s a big deal. Plans need to understand where diagnoses originate, how they’re supported, and what the downstream risk adjustment factor (RAF) impact looks like by segment and provider channel. 

Q: The Wakely team estimates a different “feel” than CMS’s topline. What does Wakely’s analysis add? 

Courtney:  helps translate CMS components into both benchmark and plan payment change. 

Blum: This point is really key. Wakely’s analysis flags that rebasing/repricing impacts aren’t fully reflected yet, which means county-level outcomes can diverge materially once the final Rate Announcement is released. The rebasing could be particularly volatile this year as CMS adjusts for rural emergency hospital payments and the removal of anomalous and suspect DME claims. Both adjustments vary by geographic area. 

Q: How should plans think about bid strategy and benefit pressure for 2027? 

Courtney: The tighter risk adjustment environment could squeeze rebates and supplemental benefit richness—especially if bids don’t adjust quickly. Wakely estimates risk-adjusted bid and rebate revenue is down roughly 0.35 percent under a set of simplifying assumptions, underscoring the margin sensitivity. 

Practically this means plans should run a few scenarios: 1) RAF compression from diagnosis source changes, 2) normalization updates, and 3) Star-related shifts—even if the Star change is estimated to be small nationally. 

Blum: I’d add provider contracting and clinical program return on investment (ROI) will likely be an even greater focus for Medicare Advantage plans. When risk score lift is constrained, the value of medical cost management and quality performance becomes more important. We have seen tremendous pushback by healthcare providers over the greater use of prior authorization, with some major health systems dropping their contracts with Medicare Advantage plans altogether. Medicare Advantage plans will have to carefully balance the need to reduce medical expenditures and maintain their provider networks to attract enrollment. Establishing strong partnerships with provider systems will be more important than ever. 

Q: What do plans need most right now? 

Courtney: This is where integrated strategy and actuarial and policy expertise really matter. HMA is supporting stakeholders with payment impact modeling, scenario analysis, and advisory services tied to benchmark rebasing, risk adjustment, Star Ratings, product strategy, and Part D payment policy, so clients can translate the Notice into concrete bid and operating decisions. 

From Wakely’s side, the detailed benchmarking and methodology interpretation helps clients quantify what CMS’s technical updates mean in dollar terms and across geographies. 

The CY 2027 Advance Notice is also a reminder that average impacts hide portfolio impacts. The plans that model “where the change hits” (diagnosis sources, provider channels, county mix, Stars trajectory) will be best positioned heading into April’s final Rate Announcement. 

Blum: And from a policy lens, plans need to connect the dots. CMS’s proposed rate notice is both an articulation of its current priorities and continued progression toward more payment accuracy, encounter-linked data, and program integrity. Medicare Advantage plans should be both prepared to operationalize these policies and to work with the agency to ensure its policies better serve Medicare beneficiaries. 

Medicare Advantage plan leaders will be those organizations that operationalize these policy directions early, constructively engage in the policy process, and form far stronger partnerships with health care providers. 

You can find more insights on the important proposed changes in plan payments, risk adjustment, and other financial and regulatory requirements for 2027 in Wakely’s summary analysis, . 

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