A Look at the Potential Impact of the High Unemployment Hardship Exception to Medicaid Work Requirements
The Republican budget reconciliation package, signed into law on July 4th, will—for the first time—require some individuals enrolled in Medicaid to meet work requirements as a condition of eligibility. When implemented by January 2027 (or sooner at state option), adults enrolled through the Medicaid expansion and certain adults enrolled in Medicaid waiver programs in Wisconsin and Georgia, will be required to work or participate in work-related activity for 80 hours or more a month or attend school half time. The law exempts certain individuals from the requirements, including parents of children ages 13 and younger, people who are medically frail, and people who meet similar work requirements in the Supplemental Nutrition Assistance Program (SNAP). The law also permits states to allow for short-term hardship exceptions for individuals who live in areas of high unemployment, where it may be more difficult to find a job.
This issue brief describes the hardship exception for individuals living in counties with high unemployment, and using the most recent available county-level unemployment data from the Bureau of Labor Statistics (BLS) and county-level Medicaid expansion enrollment data, estimates the number of counties that could meet the criteria for this exception and the number of expansion enrollees living in those counties who could be exempt from the work requirements. Because county-level enrollment data for enrollees who would be subject to work requirements in Georgia and Wisconsin are not available, this analysis only includes expansion states.
Based on this analysis, the scope of this hardship exception may be limited; just 7% of counties meet the high unemployment criteria using a 12-month average unemployment rate and 7% of enrollees live in these counties and could be exempt if their state requests the hardship exception. However, how CMS operationalizes the criteria will affect the number of counties and enrollees that qualify. Allowing states to identify counties that meet the criteria using 6-month or 3-month average unemployment rates in addition to the 12-month average rate would increase the number of counties that qualify. Also, while the current national unemployment rate is low, changes in the economy and a tightening job market could cause unemployment rates to rise. If unemployment rates increase, the number of enrollees who would qualify for this hardship exception would also increase.
What is the High Unemployment Rate Hardship Exception?
The law allows states to request a hardship exception for individuals who live in counties with high unemployment rates. Specifically, the law permits states to request exemptions for individuals who reside in counties that have unemployment rates at or above 8% or below 8% but 1.5 or more times the national average unemployment rate. This exception is optional, but for states that request the exception and receive approval, all individuals who reside in counties that meet the criteria would be exempt from the work requirements for a specified period of time. The language in the reconciliation package is similar to the statutory language that defines a waiver exemption to the work requirements in SNAP, which permits states to request exemptions for areas that have unemployment rates over 10% or that lack a sufficient number of jobs.
The law grants the Secretary of Health and Human Services (HHS) discretion in how to implement this hardship exception, including what information states must submit. While the law lays out the broad criteria needed to meet the exception, the Secretary will have the discretion to set the parameters for how the criteria will be operationalized, including what information states must provide, the length of the exception period, and the process for applying for the exception. These decisions by the Secretary will affect how easy it is for states to apply for the exception and ultimately how many counties meet the criteria and how many enrollees will be exempt from the work requirements. The law requires the Secretary of HHS to issue an interim final rule implementing the Medicaid work requirements by June 1, 2026.
CMS may look to existing SNAP regulations to help guide the criteria for qualifying for an exception. CMS officials have indicated that they plan to follow sub-regulatory guidance that already exists in other programs with similar provisions, where possible. Existing SNAP regulations provide options for the data states can use to support a waiver request, including a readily approvable waiver using 12-month average unemployment rates. The regulation also specifies that the data states submit must rely on standard BLS data or methods. Waivers are generally approved for one year; however, waivers may be approved for a shorter or longer period, if deemed appropriate. CMS may choose to follow the SNAP regulations or allow for more or less flexibility in the data that states can use to identify counties with high unemployment. These decisions will affect the number of enrollees who could qualify for the exception. States can choose whether to apply for the exception, and some may decide not to for ideological reasons or because few counties and enrollees would meet the criteria. Notably, 18 states do not have SNAP work requirement waivers.
How Many Counties and Enrollees Could Meet the High Unemployment Exception?
KFF analysis uses 12-month average county unemployment rates from June 2024 through May 2025 to estimate the number of counties that meet the criteria for the high unemployment hardship exception. The 12-month average unemployment rate is the metric used in the readily-approvable SNAP exemption waivers. The analysis then uses enrollment data for the expansion population from the 2023 T-MSIS Research Identifiable Files to estimate the number of enrollees who live in qualifying counties and who could be exempt from the work requirements if all states applied for and were granted the exceptions.
Nationally, 158 counties in expansion states meet the high unemployment criteria, and 1.4 million enrollees in these states could qualify for the hardship exception, accounting for 7% of counties and enrollees. Alternative methods could have different effects. For example, using a method where counties could qualify for the exception by meeting the unemployment criteria in any month from June 2024 to May 2025, 386 counties in 34 expansion states had unemployment rates that met the criteria. These counties represented 17% of all counties in expansion states, and 4.6 million expansion enrollees, or 23% of all expansion enrollees, reside in these counties and could be exempt from the work requirements.
Overall, while 80% of counties that meet the criteria are rural, over 80% of expansion enrollees who could be exempt from work requirements live in urban counties (Figure 2). Of the 158 counties with unemployment rates that meet the statutory criteria, 126 are located in rural areas. Because of the higher unemployment rates in rural areas, a slightly larger share of all rural counties in expansion states meet the criteria (8.5% of rural counties vs. 7% of all counties). However, because the population in rural areas is smaller, over 80% of expansion enrollees who could qualify for the hardship exception live in urban counties. Of the 1.4 million expansion enrollees who could qualify for the exception, just 273,350 (19%) are in rural counties, accounting for 10% of all expansion enrollees who live in rural counties.
Nine in ten expansion enrollees who are in counties that meet the high unemployment criteria and could be exempt from the work requirements live in five states (Figure 3). Expansion enrollees who live in counties with high unemployment rates are concentrated in just five states—California, New York, Michigan, Kentucky, and Ohio. Expansion enrollees in California account for over 50% of all enrollees living in counties that meet the criteria. In New York, over 260,000 expansion enrollees, representing 18% of all enrollees who could be exempt, live in Bronx County, the only county in the state to meet the high unemployment criteria. Overall, 93% of enrollees who could be exempt live in states with Democratic governors, who would be expected to request the exception. Across the majority of expansion states, however, the impact of the high unemployment hardship exception is small. In nine states, 2,000 or fewer expansion enrollees live in counties that meet the criteria, and in 17 states no counties meet the criteria.
Rural expansion enrollees who could qualify for the hardship exception are similarly concentrated in seven states. Half of the 273,350 expansion enrollees who live in rural counties with unemployment rates that meet the criteria and who could be exempt from the work requirements live in Kentucky and Michigan (Figure 3). Another 14% live in California, 6% live in Oregon, and 5% each live in Arizona, Louisiana, and Ohio. As with counties overall, the impact of this hardship exception in rural counties is limited. Just 10% of rural expansion enrollees live in qualifying counties, and in 20 expansion states, no rural counties meet the high unemployment criteria.
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