NJ officials warn new Medicaid rules could cause some eligible residents to lose coverage

State officials say complicated paperwork and unclear federal requirements could create administrative hurdles as new rules take effect for an estimated 540,000 residents.

More than half a million New Jersey residents will face new federal requirements next year to keep their Medicaid coverage, and state officials are warning that complicated paperwork and unclear rules could cause people who remain eligible to lose their health insurance.

The new work and activity requirements will apply to about 540,000 adults, roughly 30% of New Jersey’s 1.85 million Medicaid recipients, beginning Jan. 1. Not all of them will have to meet the requirements because some will qualify for exemptions.

Officials at the New Jersey Department of Human Services (DHS) outlined their concerns about the changes in their July 31 public comment on the interim final rule issued by the Centers for Medicare & Medicaid Services (CMS) explaining how states must administer the new requirements.

They have asked CMS to adopt policies that are practical to administer, minimize unnecessary paperwork, and protect access to health care for eligible residents. They identified several areas where CMS should change the regulations by:

• Following the law and eliminating the requirement that people with serious medical conditions, mental illness, or a substance use disorder must provide extensive documentation about how their condition impacts their ability to work
• Reducing documentation requirements that could create unnecessary barriers for eligible members
• Streamlining eligibility and renewal processes to improve the member experience and reduce administrative complexity
• ·Providing additional guidance and implementation time for states to make required technology and operational changes
• Clarifying federal requirements that remain ambiguous and difficult for states to administer consistently.

“I’ve advocated for repeal of the law that imposes these community engagement requirements, but we will follow the law,” Human Services Commissioner Stephen Cha said in a statement. “We are asking CMS to provide states with the flexibility and clarity needed to implement these requirements in a way that minimizes unnecessary administrative barriers and helps eligible people stay connected to care.”

What changes in January

The requirements are part of H.R. 1, the sweeping tax and spending law President Donald Trump calls the “One Big Beautiful Bill Act.”

Beginning Jan. 1, adults ages 19 to 64 who receive Medicaid through the Affordable Care Act expansion will face new requirements to maintain coverage. These recipients receive Medicaid benefits through what is known as an Alternative Benefit Plan and will have to complete at least 80 hours a month of approved activities, including working, attending school or vocational training, or volunteering.

Some people will be exempt, including parents and caregivers, and people with certain disabilities or medical conditions. Many Medicaid recipients, including children and adults 65 and older, are not subject to the new activity requirement.

Adults enrolled in NJ FamilyCare through the Alternative Benefit Plan who are subject to the new requirements will have to renew their Medicaid eligibility every six months instead of once a year, adding another layer of paperwork for recipients and the state.

New Jersey officials are concerned that those additional checks and documentation requirements will cause some people to lose insurance even when they remain eligible.

Who is too sick to work?

One of New Jersey officials’ biggest objections involves determining who should receive a medical exemption.

CMS guidance says people who are sick or disabled can qualify for an exemption if their condition leaves them “significantly impaired.”

New Jersey officials say the federal law does not impose that standard and that CMS has not adequately explained what constitutes a “significant impairment.”

That distinction could matter for people who have medical conditions that interfere with some kinds of work but not others.

In their comments to CMS, state officials gave the example of someone with a broken foot. The injury might prevent a construction worker from doing a job that requires standing and physical labor but have little effect on someone who works at a desk.

Determining whether each person’s condition is serious enough to qualify for an exemption could require applicants to submit extensive medical and employment documentation, state officials said.

They also warned that those requirements could be especially difficult for people with disabilities, serious medical conditions, mental illness, or substance use disorders.

New Jersey officials are calling on CMS to eliminate the “significant impairment” standard and allow people to attest to their own medical conditions rather than requiring extensive documentation.

Self-attestation will be allowed during the first year of the program that begins in January. Starting in 2028, medical exemptions will require documentation under the current federal rule.

State questions use of algorithms

New Jersey officials also raised concerns about a CMS recommendation that states consider using algorithms to help determine which Medicaid recipients qualify for medical exemptions.

The federal guidance recommends using algorithms to assign people an “acuity” score.

But state officials said CMS has not adequately explained what information should go into that calculation, what score would qualify someone as significantly impaired, or how the federal government would audit the systems states develop.

New Jersey officials argue that states need clearer standards before building systems that could help determine whether someone keeps health coverage.

A major administrative undertaking

The new requirements also mean substantial changes for the state agencies that administer Medicaid.

New Jersey will have to modify computer systems, change business processes, train workers, and communicate the new requirements to hundreds of thousands of NJ FamilyCare members.

The state also must develop ways to determine whether recipients are meeting the activity requirement and whether they qualify for exemptions.

State officials are asking CMS for additional time to build, test, and validate those systems before the requirements take effect.

The department also wants the federal government to reduce documentation requirements, simplify eligibility and renewal procedures, and provide clearer instructions to states.

“New Jersey has worked proactively to prepare for these changes, but, in order to minimize disruptions to members’ care, the federal government should rapidly clarify ambiguous provisions in the rule, and eliminate burdensome requirements that go beyond the intent of the law,” said Gregory Woods, assistant commissioner of the Division of Medical Assistance and Health Services.

“This will reduce administrative costs for states and more importantly reduce the number of eligible members who lose access to Medicaid, despite remaining eligible,” Woods said.

New Jersey Attorney General Jennifer Davenport is aco-leading a lawsuit by 24 state attorneys general and two governors challenging the Trump administration’s interim rule implementing the Medicaid requirements.