It has been a little more than a year since H.R. 1 was signed into law on July 4, 2025. Although many of the law’s health care provisions were scheduled to take effect over several years, its fiscal impact on Colorado was immediate.
Because Colorado uses federal taxable income as the starting point for calculating state income taxes, several federal tax changes automatically affected state revenue. Shortly after the law passed, the Governor’s Office estimated that these changes had turned a nearly balanced FY 2025–26 budget into an approximately $955 million shortfall, resulting in a special legislative session last August to balance the budget.
The law’s health care provisions have followed a more gradual timeline, with major changes taking effect this year, next year, and in 2028. The Rural Health Transformation Program will also continue distributing funding through federal fiscal year 2030. Colorado’s behavioral health system will therefore be implementing—and responding to—the effects of H.R. 1 for years to come.
As part of our federal advocacy efforts, CBHC raised concerns about provisions likely to affect the people and communities our members serve. Colorado’s behavioral health safety net providers care for a disproportionate share of Medicaid members, serve people regardless of their ability to pay, and provide crisis, outpatient, residential, substance use disorder, and other services that are often unavailable elsewhere in their communities.
For these providers, a loss of Medicaid coverage does not necessarily mean that a person’s need for care disappears. Instead, it can mean interrupted treatment, difficulty accessing medications, increased uncompensated care, and greater reliance on crisis services, emergency departments, or other publicly funded systems.
As several major provisions approach implementation, here is what behavioral health stakeholders should know.
Changes to immigrant eligibility
Beginning October 1, 2026, federal Medicaid eligibility will end for several groups of lawfully present immigrants, including refugees, asylees, humanitarian parolees, and certain other humanitarian populations. HCPF estimates that approximately 7,000 Coloradans could lose Medicaid coverage. For behavioral health providers serving immigrant and refugee communities, these coverage losses could interrupt established therapeutic relationships, limit access to psychiatric medications and substance use disorder treatment, and increase uncompensated care.
New eligibility and enrollment requirements
Beginning January 1, 2027, certain adults ages 19–64 in the Medicaid expansion population will be required to complete at least 80 hours of qualifying activities each month, be enrolled in an educational program at least half-time, or earn at least $580 per month. Qualifying activities may include employment, community service, or participation in an approved work program.
HCPF estimates that approximately 378,500 members are included in the expansion population before exemptions are applied. The department is working with counties, health plans, providers, community partners, and other state agencies to identify exemptions, automate verification where possible, and communicate the changes without unnecessarily alarming people to whom the requirements do not apply.
The law also requires Medicaid eligibility for the expansion population to be redetermined every six months instead of annually. Together, these policies will require members to navigate the eligibility process more frequently and provide additional information about their work, income, education, or exemption status.
The additional reporting and verification requirements create more opportunities for eligible people to lose coverage for procedural reasons, such as missed notices, outdated contact information, difficulty obtaining documentation, or confusion about which requirements apply. Coverage disruptions can interrupt treatment, affect access to medications, and leave providers without a reliable reimbursement source for ongoing care. These risks are especially relevant in behavioral health, where continuity and consistency can be important components of effective treatment and recovery.
Medical-frailty exemptions
One potential protection in H.R. 1 is an exemption from the community-engagement requirements for people who are considered medically frail or have special medical needs. Under the federal terminology, this category includes people with a substance use disorder or a “disabling mental health condition.” Participation in a substance use disorder treatment or rehabilitation program is also separately recognized as an exemption.
However, CMS’s June 2026 interim final rule requires a person’s medical condition to “significantly impair” their ability to comply with the community-engagement requirement. This creates uncertainty about how the exemption will apply to people with behavioral health conditions and what documentation may be required.
People with serious mental illness and substance use disorders participate fully in employment, education, caregiving, and their communities. At the same time, each person’s circumstances are different, and the effects of a behavioral health condition may change over time. A standard focused narrowly on a person’s ability to complete qualifying activities may not fully reflect their clinical needs, treatment circumstances, or eligibility for an exemption.
When the state cannot verify an exemption using existing information, members may have to submit additional documentation. CBHC is concerned that eligible people could lose coverage because notices are not received, the necessary records are not readily available, or documentation is not submitted by the required deadline.
Behavioral health providers may play an important role in helping clients determine whether they qualify for an exemption, obtain necessary documentation, and understand requests from the state. CBHC will continue working with HCPF to clarify the role providers may be asked to play and to advocate for processes that do not create unnecessary clinical or administrative burdens.
Rural Health Transformation Program
One of H.R. 1’s opportunities for new health care investment is the Rural Health Transformation Program. Colorado received approximately $200 million for the program’s first year and is now accepting applications from qualifying organizations. Applications are due August 3, 2026.
The funding cannot be used to replace Medicaid revenue lost because of other provisions in H.R. 1. Instead, projects must advance sustainable rural health transformation in areas such as workforce development, technology and infrastructure, access to care, chronic disease management, and innovative service-delivery models.
For behavioral health providers who are eligible for this funding, the program may create opportunities to strengthen the rural workforce, expand integrated care, improve access through telehealth and other technology, develop regional partnerships, and build service models that are sustainable beyond the grant period.
Organizations must apply during the first funding year to remain eligible for funding in subsequent years. Because future awards are expected to build upon the initial application, interested members should consider both their immediate needs and how proposed projects fit within a longer-term vision for rural behavioral health care. Find out more here.
What comes next
Over the past year, Colorado has worked to interpret federal requirements, modify eligibility systems, develop communications for Medicaid members, and prepare counties, health plans, providers, and community partners for implementation—often while waiting for additional federal guidance.
For behavioral health stakeholders, the most immediate task will be supporting continuity of coverage and care. Providers should watch for communications from HCPF and health plans, remind clients of the importance of keeping their contact information current, and prepare staff to recognize notices or requests related to eligibility, community engagement, and exemptions.
CBHC will continue monitoring implementation and advocating for policies that preserve coverage, minimize administrative barriers, and protect the stability of Colorado’s behavioral health safety net.
More information and stakeholder resources are available on HCPF’s H.R. 1 webpage.
