District of Columbia’s FY 2026 Budget Unveils BHP Initiative

This alert outlines the purpose of the BHP, who will be affected, how the program will be funded, and what practical steps District residents, employers, and service providers should take as the transition unfolds.

The new BHP is being introduced as a response to a projected steep increase in local funding needed to sustain existing Medicaid eligibility levels. To address this, the FY 2026 budget lowers Medicaid income limits for adults from 221% of the federal poverty level (FPL) to 135% FPL, which means approximately 25,500 parents, caretakers, and childless adults are expected to lose Medicaid eligibility.

Instead of shifting this population to marketplace plans, where higher out-of-pocket costs could result in coverage losses, the Mayor and Council have authorized the DC Health Benefit Exchange Authority (HBX) to establish a BHP under §1331 of the Affordable Care Act. The BHP will be primarily financed by the federal government, which will provide up to 95% of the advance premium tax credits and cost-sharing reductions that individuals would otherwise receive. As a result, local funds will be used mainly for program administration, saving the District an estimated $42.8 million in FY 2026 alone.

Eligibility for the BHP, as outlined in the draft blueprint published by HBX on June 16 (with a 30-day public comment period closing July 16), will include adults with incomes between 138% and 200% FPL — roughly $21,000 to $30,000 for an individual or $44,000 to $60,000 for a family of four. Eligible individuals must be under age 65, and the program will include lawfully present immigrants who are subject to the federal five-year Medicaid bar. Those who are eligible for Medicaid, Children’s Health Insurance Program, Medicare, or affordable employer coverage will not qualify for the BHP. Children up to 319% FPL and pregnant individuals who remain income-eligible for Medicaid will continue to enroll in Medicaid. If a BHP enrollee becomes pregnant, they will shift back to Medicaid for the duration of the pregnancy and for 12 months following the birth of their child.

The transition to the BHP will begin with a public comment period on the blueprint from June 16 to July 16, during which residents, advocates, and carriers can submit feedback to HBX. HBX aims to finalize the program design and submit it for federal approval to the Centers for Medicare & Medicaid Services in the summer or fall of this year. Carrier contracting will take place in the fall, with HBX working to execute contracts with health maintenance organizations (HMOs) and managed care organizations (MCOs) to ensure a seamless transition from existing Medicaid plans.

Coverage under the BHP is set to become effective on January 1, 2026. Medicaid enrollees who are above the new 135% FPL limit will be automatically enrolled in the BHP to prevent any gaps in coverage. Medicaid renewals occurring in November and December of this year will be managed so that coverage rolls into the BHP on January 1, 2026, without interruption.

Coverage for BHP members is expected to closely mirror the District’s Essential Health Benefits benchmark. This means enrollees should have access to primary and specialty outpatient care, hospitalization, lab services, imaging, prescription drugs, preventive services, maternity care, and basic behavioral-health outpatient visits.

However, some Medicaid-specific services are not currently funded in the BHP appropriation. These include adult and pediatric dental care, Medicaid-equivalent behavioral-health and substance use disorder residential services, vision hardware, and non-emergency medical transportation. The estimated cost for adding adult and pediatric dental is $5.2 million, while behavioral-health and substance use disorder residential services would require about $26 million in FY 2026. The cost for vision hardware and transportation is still to be determined.

HBX’s actuary is currently assessing whether the federal funding will allow for $0 premiums and minimal cost-sharing. Early modeling suggests there will be no monthly premium and potentially no copayments, helping to preserve affordability for enrollees.

The transition to the BHP will have a significant impact on several groups. Residents losing Medicaid will receive renewal notices from DHCF explaining the change. While no action is required to retain coverage, individuals are encouraged to update their addresses to avoid missing important mailings, review provider networks once BHP plan information is available, and be aware that some current benefits, such as dental, may not continue unless additional funding is approved.

Providers and MCOs should note that HBX has invited all District HMOs, including current Medicaid MCOs, to offer BHP coverage. Providers are advised to monitor credentialing bulletins to ensure uninterrupted participation and to clarify any coverage differences, such as inpatient psychiatric exclusions.

For employers, particularly small employers participating in DC Health Link, there will be no direct impact. However, it is important for employers to be aware of the changes, as employees may shift between programs if their household income fluctuates.

Several policy questions remain outstanding. The Council, during its budget process, is urging the executive to identify resources to add adult dental and full behavioral-health parity before open enrollment begins. Coordination between DHCF, the DC Department of Human Services, and HBX through robust data exchange is essential to prevent coverage disruptions, often referred to as “churn.” Final actuarial certification will determine whether a zero-premium, zero-copay design is financially sustainable. Additionally, contract terms will dictate whether BHP members remain with their current Medicaid MCO or have the option to select among multiple plans.

Key upcoming deadlines and action items include the July 16 deadline for submitting public comments on the BHP blueprint to HBX. In the fall of this year, stakeholders should watch for HBX carrier and benefit announcements, and providers should begin contract amendments. Medicaid renewals in November and December  will be the last opportunity for individuals to update their income and contact information before automatic BHP enrollment. Coverage under the BHP will begin on January 1, 2026, at which point enrollees should monitor their plan ID cards and formularies.

In summary, the District’s BHP is intended to protect low-wage adults from losing comprehensive health coverage while also easing local budget pressures. The program’s major features — no premiums, Medicaid-like benefits, and continuity with existing MCOs — are positive developments. However, it is important for clients to stay informed about decisions regarding dental and intensive behavioral-health services, confirm their providers’ participation, and meet all administrative deadlines to ensure uninterrupted care.

Our team will continue to monitor the Council’s deliberations on the BHP and supplemental funding. Please contact us with specific questions regarding eligibility determinations, compliance requirements, or stakeholder engagement opportunities.