Iowa lawmakers have approved a bill mandating that certain Medicaid recipients work to retain benefits, a move expected to affect tens of thousands of constituents who use the health program.

The new legislation makes Iowa one of the latest states to pursue such requirements. Georgia remains the only state with work requirements already in place, but may others have similar legislation pending approval or at various stages of implementation.

Newsweek has contacted Iowa lawmakers and the state’s Department of Health and Human Services for comment via email outside regular working hours.

Why It Matters

Iowa’s new Medicaid work requirement is expected to affect low-income adults who receive health care through the state’s Medicaid expansion under the Affordable Care Act (ACA).

A number of states have recently pushed for Medicaid work requirements. On the federal level, House Republicans have proposed similar requirements as part of its budget.

Generally, critics of work requirements warn they will substantially weaken the Medicaid system, the largest public health insurance program in the country, by forcing millions off the service. Supporters argue that work requirements will foster employment, reduce fraudulent claims and improve personal responsibility.

What To Know

The bill seeks to include work requirements as a condition of eligibility for those on the Iowa Health and Wellness Plan, meaning they use Medicaid under the ACA expansion.

The legislation said, “The goal of including work requirements is to reduce the dependence of low-income Iowans on public assistance programs through efforts that advance economic stability and mobility.”

To be eligible for the program, Iowans 19 to 64 years old would have to work 80 hours a month, although some recipients would be exempt from the ruling.

Those who are “determined to be disabled by the United States social security administration” are exempt. Exemptions also include those identified as “medically frail,” caregivers of a child under the age of 6 and people with “high risk” pregnancies.

As the bill has been deemed of “immediate importance,” the new rules would come into effect upon its enactment.

According to the bill, if federal law or regulations affecting work requirements for the Iowa Health and Wellness Plan are “modified to exclude work requirements as a basis for maintaining eligibility,” the department will discontinue the plan entirely, if it gets approval to do so.

A fiscal note on the bill said that as of April, 183,000 Iowans were enrolled on the state’s Medicaid expansion program. Of those enrollees, the report expected 32,000 individuals to lose coverage beginning in 2026 because of the requirements.

The report also anticipated that the new requirements would decrease the state’s total Medicaid expenditures by about $2.5 million in the financial year 2026 and by about $14.4 million in the financial year 2027.

What People Are Saying

The Iowa State Democrats account on X, formerly Twitter, wrote on Tuesday: “Many Iowans rely on state funding to help cover their healthcare needs. The scale of our maternal healthcare crisis is growing. The Medicaid waiver waitlist for Iowans with disabilities is growing. This Republican budget proposal fails to bring relief to those Iowans in need.”

The Iowa Democrats X account wrote on Tuesday: “Countless Iowans rely on Medicaid to access healthcare coverage. Iowa Republicans in D.C. plan to ignore the concerns of their constituents and rip away their coverage to pay for a $4.5 trillion tax cut for the wealthy.”

Democratic state Senator Sarah Trone Garriott said: “Taking away people’s health care does not help them work. It often keeps people out of the workforce, because then they can’t pay for their medications, they can’t get the care they need. They end up getting sicker. They end up missing more work.”

Republican state Senator Mike Klimesh said: “So at the end of demonstration year five, we will see a savings in the state of Iowa as a result of this program of $50 million. $50 million in savings that we can really reallocate or reappropriate to other areas, perhaps work with our programs. We may be able to develop with further communication between ourselves in the House.”

What Happens Next

The Iowa Senate approved the bill in a 33-13 vote, the Des Moines Register reported. It went back to the House, which passed it in a 56-30 vote on Wednesday.

The legislation now heads to Governor Kim Reynolds, who is expected to sign it.

From a 1.5-ounce ice cream novelty to a 70,000-pound cotton picker, eight items await weighty decisions by Iowans on which will advance in the Coolest Thing Made in Iowa contest.

The contest began May 5 with 69 nominees. Voters will have from Friday, May 16, to May 21 to vote on which of the eight finalists announced Thursday, May 15, will be in the final four.

The decision process won’t be easy for voters as they ponder the “coolness factor” of products ranging from  heavy farm equipment to a chocolate pump and a pastry.

Butter Braid pastries from Country Maid Inc. of West Bend was the only repeat product from the Top Eight contestants a year ago, the initial edition of the annual contest. Sold through fundraisers, the pastries have helped thousands of organizations raise over $320 million for various causes, according to Country Maid.

The contest is sponsored by the Iowa Association of Business and Industry and MidwestOne Bank and culminates in a winner being named at the ABI’s annual conference June 11 in Council Bluffs. Voting is online at coolestthingia.com.

Iowa is one of 20 states holding the contests. A self-propelled hay baler from Vermeer Corp. of Pella took the state’s initial top prize in 2024.

Last year, the competition received 86 nominations representing products made in 53 cities across Iowa. Four rounds of voting took place, with 76,382 total votes cast.

The contest also serves as a chance to promote manufacturing in Iowa, accounting for more than 220,000 jobs and contributing over $43 billion to the state’s economy, according to ABI.

Here are the final eight products:

Kevin Baskins covers jobs and the economy for the Register. Reach him at kbaskins@registermedia.com.

• Iowa lawmakers have passed Gov. Kim Reynolds’ bill to cut unemployment taxes for businesses, resulting in more than a $1 billion tax cut over five years.
• The bill would cut in half the amount of wages on which businesses pay unemployment taxes, as well as lower the maximum unemployment tax rate from 7% to 5.4% and reduce the number of tax tables.
• Republicans said Iowa’s high unemployment trust fund balance shows the state is over-collecting, while Democrats said the bill gives corporations a tax break and fails to help workers.

Iowa businesses will see a nearly $1.2 billion tax cut on the money they pay into the state’s unemployment trust fund under a proposal lawmakers passed and is headed to Gov. Kim Reynolds for her signature.

In a statement, Reynolds said Iowa’s unemployment tax “has needlessly punished Iowa businesses.”

“Our unemployment trust fund balance is at an all-time high of nearly $2 billion, while the duration of unemployment claims is at a record low of around nine weeks,” she said. “We’re clearly over-collecting.”

Reynolds called for the unemployment tax cut in her Condition of the State address in January. The bill would cut in half the amount of wages on which businesses pay unemployment taxes, as well as lower the maximum unemployment tax rate from 7% to 5.4% and reduce the number of tax tables.

Those taxes flow into Iowa’s unemployment trust fund, which pays unemployment benefits to workers when they are laid off.

“Passing this bill means nearly $1 billion in savings over five years for Iowa businesses of all sizes,” Reynolds said. “Thank you to our legislators and key stakeholders for their support to help attract new business to Iowa and place existing businesses on a level playing field with our neighboring states.”

The Iowa Senate voted 32-16 along party lines on May 14 to pass the bill, Senate File 607. House lawmakers followed a few hours later with a party-line vote of 60-27.

Democrats said the bill gives businesses a tax break while doing nothing to help workers.

“Fundamentally, my Democratic colleagues and I do not believe that we should be helping our employers on the backs of our workers,” said Senate Minority Leader Janice Weiner, D-Iowa City.

Democrats seek to restore unemployment benefits cut by Republicans in 2022

Democrats argued the tax cuts for employers are possible because of a 2022 law passed by Republicans that cut the maximum number of weeks Iowans can receive benefits from 26 weeks to 16.

They offered amendments to restore Iowa to 26 weeks of unemployment benefits, or 39 weeks in the case of a plant closure. Republicans voted the proposals down.

Sen. Janet Petersen, D-Des Moines, read a list of Iowa companies that have laid off workers this year.

“These are real Iowans facing real job losses just this year,” she said. “And instead of helping them, you want to pull money out of Iowa’s unemployment insurance system to give another corporate tax break to companies that are laying them off.”

Sen. Adrian Dickey, R-Packwood, said Iowans still get 26 weeks of unemployment benefits if there is a plant closure, although that number is down from 39 weeks before the 2022 law.

“When a business does close its doors and goes out of business, we have been compassionate about that issue by moving that to six months of unemployment benefits,” he said.

Sen. Molly Donahue, D-Cedar Rapids, urged Republicans to “stand behind workers.”

“Our unemployment system is rigged for the employers, particularly with this bill,” she said. “It is the workers who hold businesses up and we need to do better by those workers, not give even more breaks to the employers who are laying them off.”

Dickey said the 2022 law included changes that has helped Iowa Workforce Development get Iowans back to work sooner after they are laid off, lowering the state’s average unemployment duration to nine weeks.

“The Republican Party has been the party to stand up for Iowa workers,” he said. “We are the party that wants our workers to aspire more than desiring an unemployment check.”

How much would Iowa employers save in unemployment taxes?

According to an analysis by the nonpartisan Legislative Services Agency, businesses would see a $1.18 billion tax cut over five years if the bill becomes law.

That would amount to roughly $200 to $250 million less that businesses pay into the unemployment trust fund each year, according to the agency’s estimates.

• 2026: $193.2 million
• 2027: $229.4 million
• 2028: $241.2 million
• 2029: $253.5 million
• 2030: $266.3 million

The Legislative Services Agency estimates that Iowa’s unemployment trust fund balance will rise to $2.06 billion in 2026, the first year lower tax rates would take effect. In 2030, the agency estimates the trust fund balance will stand at $1.78 billion.

Will businesses use the savings to help employees?

The bill says employers should use any savings they receive from the tax cuts to pay for employee salaries or benefits or to use as an alternative to unemployment benefits during periods of seasonal layoffs.

House Democrats tried to amend the bill to make that mandatory.

Rep. J.D. Scholten, D-Sioux City, said “knowing what you should do and actually doing it are two different things.”

“Coming into session I came with a mindset that I should eat healthy, but that didn’t happen,” Scholten said, getting laughs from his colleagues.

Corporations should take care of workers, he added, “but that’s not reality.”

“Let me be clear: billionaires do not work harder than the working class,” Scholten said. “It’s bills like this that put a thumb on the scale towards billionaires and towards multinational corporations.”

Rep. David Young, R-Van Meter, said the Democrats’ amendment would create a mandate on businesses and could prevent them from spending money on new equipment or other ways of improving the business.

“While many of us would like to see and encourage employers to use all the savings from the bill on their employees, businesses may need flexibility in difficult economic times,” he said. “And this could actually result in harm to employees instead by tying the hands of employers to strengthen and grow their business.”

Iowa has nearly $2 billion in its unemployment trust fund

Iowa had $1.95 billion in its unemployment trust fund as of May 12.

As of Jan. 1, 2024, Iowa ranked ninth in the country for unemployment trust fund balance, at $1.8 billion, ahead of more populous states.

Democrats pointed out that Reynolds used $727 million in federal COVID-19 relief funds to shore up the fund during the pandemic.

Sen. Zach Wahls, D-Coralville, said it’s a good thing that Iowa has a high trust fund balance, raising concerns about what could happen if a recession hits.

“When the whole point of the fund is to be ready for a rainy day and you see storm clouds on the horizon, you want that fund to be full,” he said. “Because what you don’t want is to have to raise taxes when you’re headed into a recession to make up for a shortfall.”

Dickey said the unemployment trust fund is structured so that if the fund dips below a certain level, businesses move to a higher tax rate so the fund is replenished.

“I don’t agree that those scenarios are coming from an economic standpoint,” he said. “But if they are, the fund is structured to handle those situations.”

How does Iowa’s unemployment insurance taxable wage base compare with other states?

Iowa currently taxes businesses on about $39,500 of an employee’s wages.

That ranks Iowa 12th in the country for its taxable wage base for unemployment insurance.

Iowa’s wage base is the second-highest among surrounding states, second to Minnesota ($43,000).

Reynolds’ proposal would cut that number in half, meaning Iowa would tax businesses on about $19,800 of an employee’s wages.

Iowa would still tax more wages than South Dakota ($15,000), Wisconsin ($14,000), Kansas ($14,000), Illinois ($13,916), Missouri ($9,500), Michigan ($9,000) and Nebraska ($9,000).

The governor’s proposal would also lower the top rate paid by employers from 7% to 5.4%, reducing both the tax itself and the base they pay the taxes on.

(This story was updated because an earlier version included an inaccuracy.)

Stephen Gruber-Miller covers the Iowa Statehouse and politics for the Register. He can be reached by email at sgrubermil@registermedia.com or by phone at 515-284-8169. Follow him on X at @sgrubermiller.