The federal One Big Beautiful Bill Act (OBBBA) includes significant changes to Medicaid and CHIP programs under the Working Families Tax Cut, or WFTC (Public Law 119-21). Of particular interest are new community engagement and work requirements that persons aged 19 to 64 must earn to maintain eligibility for benefits. Since states play an important role in disbursing federal benefits, guidance has been urgently awaited.
On December 8, 2025, the Centers for Medicare & Medicaid Services (CMS) published a memo outlining state requirements for ensuring compliance. CMS is a federal agency within the U.S. Department of Health and Human Services (HHS) that administers Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the Health Insurance Marketplace. It ensures quality care, sets health standards, and impacts over 160 million people.
What Are WFTC work requirements?
Work requirements apply specifically to states that opted into Title VIII Medicaid expansion, an opportunity offered to states under the Affordable Care Act (enacted in March 2010). The ACA expanded Medicaid benefits to certain low-income individuals. The new WFTC rules add a work and/or community service requirement that able-bodied individuals must fulfill to continue to receive benefits (e.g. Medicaid, SNAP).
Adults ages 19 to 64 in the Medicaid expansion group, not subject to certain exemptions such as disability or dependent care responsibilities, have a minimum requirement of “community engagement” of 80 hours per month (e.g. work, volunteering).
In California, these new requirements may impact the eligibility of nearly 3 million recipients beginning January 1, 2027, when the rules take effect. While some States that demonstrate they are making a good-faith effort may request an extension from the Federal Government, the Feds are also allowing States the option to implement the work requirement sooner.
What are the state policy guidelines for WFTC?
The CMS has identified four key principles that will guide policy development on community engagement:
- Connect Members to Work and Community. Center the connection between health and work through community engagement and build habits that lead to success.
- State Flexibility. Balance the benefits of state flexibility with the potential costs of options, including systems and operational costs.
- Promote Alignment. Where possible, align policies with existing statutory and regulatory requirements including existing requirements for Medicaid, SNAP, TANF, IRS, and the Marketplace. This will help defray operations costs and streamline business flows.
- Protect Taxpayers. Ensure state community engagement determinations and verifications are easily auditable.
According to the CMS, “These principles are crucial as they provide a framework that improves program efficiency and sustainability, ultimately improving health outcomes.”
How can the WFTC work requirements be combined?
The community engagement requirements of the WFTC could be satisfied through one of the following:
- Work at least 80 hours per month
- Complete at least 80 hours of community service per month
- Participate in a work program defined by the Food and Nutrition Act of 2008 for at least 80 hours per month
- Be enrolled at least half-time in an education program at an institution of higher education or a career and technical education setting.
Individuals may also use a combination of hours participating in work, school, and community service to meet the 80-hour minimum requirement.
An individual can meet the community engagement requirements if their monthly income is not less than the applicable minimum wage multiplied by 80 hours. For seasonal workers, they can meet the community engagement requirements if they had an average monthly income in the last six months that is not less than the applicable federal minimum wage multiplied by 80 hours.
What are WFTC exclusions and exceptions?
As the work rules are intended only for able-bodied individuals, certain benefit recipients are excluded from the work/community service requirement under the new rules. Those excluded include:
- Veterans with a total disability
- American Indians and Alaska Natives
- Former foster care youth
- Pregnant women, as well as those who qualify for postpartum medical assistance
- Family caregivers are exempt, including a parent, guardian, caretaker-relative, or family caregiver of a child who is 13 years old or under
- An inmate in a public institution
- Caregivers of a disabled individual
- Medically frail Individuals, including those with a serious medical condition
- Individuals with special needs, including those who are blind, disabled, or have a disabling mental disorder
- Individuals who have a substance abuse disorder are only excluded if they are participating in a qualifying drug addiction or alcohol treatment and rehabilitation program
- Individuals living with a physical, intellectual, or developmental disability that impairs their ability to complete one or more activities of daily living.
Non-Compliance Procedures
According to the Center for Community Solutions, if the state cannot verify that someone has met the requirements, it must provide notice to the individual. Applicants and current enrollees have 30 calendar days from receiving a notice to prove that they have either met the requirements or provide an explanation as to why they should be exempted. Notice must explain how the applicant should demonstrate compliance or request an exemption.
In addition, if an applicant/enrollee cannot demonstrate compliance or exemption, the state must check that the individual isn’t eligible for Medicaid under another category or another insurance option.
An individual who is determined to be eligible for Medicaid expansion, but is not meeting the work/community engagement requirements may be considered ineligible for continued Medicaid or SNAP benefits. Additional information about the Working Families Tax Cut may be found at this Medicaid webpage. If you have questions on how these changes will impact your regional center or not-for-profit organization, please reach out to your CPA at LvHJ for a consultation.
See Also OBBBA Key Provisions for Medicare and Medicaid Access
