As we continue to see numerous changes to the state law employee benefits landscape, it can be more challenging than ever to stay abreast of critical issues that potentially impact employer benefit plans.
To keep you informed on the latest developments affecting our industry, Lockton has created the following overview of the most pressing state news and hot-button topics as states across the country wrestle with complex issues. This includes updates on dense and frequently shifting topics like abortion laws and gender-affirming care mandates, as well as standard changes in established programs such as covered lives assessments, long-term care tax assessments and commuter benefits.
We hope the following equips employers with the necessary knowledge to navigate the ever-changing state law landscape enabling them to structure benefit plans that best support their employee populations.
ABORTION AND REPRODUCTIVE CARE
State updates to abortion and reproductive care laws were prevalent this year. Litigation and legal challenges to state abortion bans have been making their way through a number of states. Two U.S. Supreme Court opinions issued in June 2024 yielded practical effects while declining to rule on the merits. Both the U.S. Department of Health and Human Services (HHS) and California released regulations restricting use and disclosure of reproductive protected health information (PHI). Finally, at least ten states will offer voters the chance to decide on whether to enshrine abortion rights in state constitutions this fall.
State Litigation Continues on Abortion Bans
At the state level, legal challenges continue to make their way through the courts with several major updates this year. In April 2024, the Arizona Supreme Court held that the state could enforce a near-total abortion ban, but the state governor swiftly responded by passing a bill in May to repeal the ban entirely. Initial questions surfaced about whether the ban would go into effect for a short period between the ban and the bill’s effective dates; however, the Arizona Attorney General confirmed that the repeal is effective Sept. 14 and, because the ban is stayed by court orders until at least Sept. 27, it will not take effect so long as current court orders remain in place.
Meanwhile, Iowa’s 6-week abortion ban went into effect in July 2024 after the Iowa Supreme Court issued a decision upholding the law, Nebraska’s Supreme Court upheld its combined law banning abortion after 12 weeks and restricting gender-affirming care for minors under age 19, and the Utah Supreme Court blocked enforcement of its near-total abortion ban while a lower court continues its review of a constitutional challenge to the law.
The Wisconsin Supreme Court has also agreed to review its state abortion ban after much confusion over the state law in recent years. The state has an abortion law on the books dating back to 1849, which many interpreted as a total abortion ban after the U.S. Supreme Court Dobbs ruling. However, a circuit court judge ruled in 2023 that the law applied to feticide, not abortion. The ruling was appealed, with both plaintiffs and defendants asking the Wisconsin Supreme Court to bypass appeals courts and take up the matter directly. In July 2024, the Court agreed to hear the case directly in addition to a separate case brought by Planned Parenthood alleging that the state’s current abortion ban is unconstitutional.
Other Updates to Abortion and Reproductive Care State Laws
The U.S. Supreme Court issued two decisions on abortion access that did not address the merits of the challenges but still yielded effects in practice. In the first, the Court’s ruling allowed broader access to Mifepristone to remain in place, including telehealth consultations, pharmacist dispensing, and mail-order access (see FDA v. Alliance for Hippocratic Medicine (opens a new window)). In the second, the Court reinstated a lower court order blocking enforcement of Idaho’s abortion ban in medical emergencies, permitting physicians to provide abortions to stabilize patients with emergency conditions on a temporary basis while litigation continues. See our recent U.S. Supreme Court Recap Alert (opens a new window) for more details on these cases and impacts to employee benefits.
Another recent update, while not directly issued at a state level, will impact all states as HHS issued new HIPAA regulations that restrict the use and disclosure of “reproductive health care” by covered entities, including employer-sponsored health plans. See Lockton’s recent Alert (opens a new window) for additional details on changes for group health plans in supporting reproductive health care privacy.
California likewise enacted AB 352 in late 2023 with effective dates on several new privacy rules beginning in January and July 2024. The bill generally prohibits pharmacies and health data companies from providing information related to a patient’s abortion to anyone from another state unless authorized by an exception in the California Confidentiality of Medical Information Act (CMIA) or the patient authorizes the release of information. It also requires enablement of data security features to segregate and protect health information related to abortion, contraception, and gender-affirming care so that it is not readily accessible across state lines. The California Attorney General sent letters to eight major pharmacy chains and five health data companies in August 2024 requesting that they provide information on their compliance with CMIA and the new AB 352 requirements.
Finally, we may see more state level changes as at least ten states, including Arizona and Florida, will include proposed constitutional amendments on their ballots later this year to allow voters to decide whether to enshrine abortion rights into their state constitutions.
Lockton comment: Abortion laws were a hot topic this year and promise to remain a news fixture in the coming years as states continue to contend with constitutional challenges. We expect to see updates from ongoing litigation through 2025 as well as potential changes to state constitutions after voters decide on amendments this November. We will continue to monitor these changes and provide updates for Lockton’s clients in our State-by-State Guide to Abortion Laws as they arise.
GENDER-AFFIRMING CARE AND TRANSGENDER BENEFITS
Gender-affirming care law updates were also widespread this year. The Eleventh Circuit held that employer health plans not covering treatment for gender dysphoria violate Title VII, but the Court has agreed to a rehearing to reconsider the case. A Florida court struck down its ban on gender-affirming care for minors, but the decision has already been stayed while an appeal moves forward. Another Florida district judge ruled that its state employee health insurance plan violated Title VII by excluding coverage for gender reassignment services for transgender employees. Texas and Ohio upheld state bans on gender-affirming care for minors, and a federal appeals court declined to reconsider a decision allowing Alabama’s ban to go into effect in January 2024. The U.S. Supreme Court agreed to hear a case challenging the constitutionality of state gender-affirming care bans in its next term. Finally, the Biden administration clarified its position on gender-affirming care for minors after earlier statements drew criticism from LGBTQ+ advocacy groups.
11th Circuit Court Rehearing on Whether Employers Must Cover Gender Transition Services in Employee Health Plans
The United States Court of Appeals for the Eleventh Circuit (covering Alabama, Florida, and Georgia) on May 13, 2024 upheld a landmark ruling from a 2022 case, holding that an employer’s health plan that does not cover treatment for gender dysphoria, including gender-affirming surgery, violates Title VII, the federal civil rights law banning discrimination on the basis of sex (see Lange v. Houston County (opens a new window)). In early June, Alabama Attorney General Steve Marshall, joined by 23 other state attorneys general, petitioned the court for a rehearing to overturn the ruling, arguing that the court’s ruling misinterpreted Title VII and creates chaos for employers by drastically expanding Title VII’s liability. The Court agreed to the rehearing in early August (opens a new window), which vacates the previous ruling as the entire panel of judges on the court reconsiders whether employers’ denial of employee coverage for gender-affirming care violates Title VII protections.
Florida’s Overturn of Gender-Affirming Care Ban Stayed by 11th Circuit Appeals Court Pending Appeal
On June 11, 2024, a district court judge ruled that Florida’s law prohibiting gender-affirming care for minors and related restrictions for adults’ access to such care are unconstitutional. The ruling is especially significant because Florida was the first state to push for gender-affirming care restrictions for transgender adults; most states with bans have enacted prohibitions only for minors under age 18 or 19. Florida promptly appealed and the 11th Circuit just as quickly issued a stay on the district court’s ruling while the appeal continues, thus allowing the Florida ban to go back into effect in August 2024.
Another Florida district judge in August 2024 ruled that Florida’s state employee health insurance plan violates Title VII employee protections against discrimination on the basis of sex by excluding coverage for gender reassignment or modification services for transgender employees but covering the same treatments for other medically necessary reasons not based on sex. While the ruling is still in effect as of this writing, we would not be surprised to see a stay in the near future given Florida’s recent halt of several other gender-affirming care rulings.
Texas Supreme Court Upholds State Gender-Affirming Care Ban for Minors
On June 28, 2024, the Texas Supreme Court upheld the state’s ban on gender-affirming care for minors. A lower court had held the law was unconstitutional, but it was allowed to take effect in September 2023 after an injunction was lifted while legal proceedings continued. The Texas law prohibits a number of practices for the purpose of transitioning a child’s biological sex or affirming the child’s perception of their sex if inconsistent with their biological sex.
Ohio Judge Upholds Ban on Gender-Affirming Care for Minors
On Tuesday, Aug. 6, 2024, an Ohio district court judge upheld a state law banning gender-affirming care, including puberty blockers, hormone therapy, and, notably, provisions related to mental health treatment, for transgender minors effective immediately. The law, which was passed in January 2024 with an effective date in April 2024, had been temporarily blocked while the court reviewed the case, but is now in effect. An appeal is expected to be filed on the ruling.
11th Circuit Court Declines to Reconsider Gender-Affirming Care Decision
In September 2024, the 11th Circuit Court of Appeals refused to reconsider an earlier ruling allowing Alabama’s ban on gender-affirming care for minors to go into effect. The law, initially passed in 2022, had a complicated journey through the courts, but was allowed to go into effect in January 2024 after the 11th Circuit granted the state’s request to delay a preliminary injunction blocking the law while it considered whether to grant the plaintiffs’ request for a full-court rehearing. As a result of the September ruling, the state ban remains in effect.
California Health Insurer Fined for Denying Gender-Affirming Care Coverage
A major insurer in California was fined $850,000 in combined penalties by the California Department of Managed Health Care in August 2024 after denying members coverage for gender-affirming care. The plan’s actions were not in compliance with California’s Insurance Gender Nondiscrimination Act, which has been in place since 2013 and prohibits discrimination on the basis of an insured or prospective insured’s actual or perceived gender identity or transgender status. Over 150 members were denied coverage for procedures deemed “not medically necessary” and classified as “cosmetic” when used to alter the appearance of an individual who had undergone, or was planning to undergo, sex reassignment surgery. The same procedures were covered for the purpose of modifying bodily structures to create a “normal appearance for the target gender.” The insurer must also hire a dedicated case manager for members with gender dysphoria to facilitate case reviews, most of which have already been reversed to provide the appropriate coverage.
Biden Administration Clarifies its Support for Gender-Affirming Care
The White House drew backlash after comments it issued in July stating that, while it supports gender-affirming care for minors, surgeries should be limited to adults. After pressure from LGBTQ+ advocacy groups following the statement, the administration issued a clarification to its previous statement, maintaining that its policy on gender-affirming care remains unchanged and it continues to respect the role of parents, families, and doctors – not politicians – in making these decisions. It continued to note that gender-affirming surgeries are typically reserved for adults, and it believes they should be, but “above all, families should have the freedom to make the medical decisions that they and their doctors believe are best for them” and that it continues to “oppose attempts to limit healthcare for transgender individuals in the courts or through legislation.”
Lockton comment: Much like abortion laws, state regulation of gender-affirming care remains a constantly shifting area. We anticipate further litigation on appeals to these recent court rulings and will continue to track updates to state laws and pending court cases for Lockton clients in our State-by-State Guide to Gender-Affirming Care Laws. We also hope to welcome some long-awaited clarity in this space in 2025, as the U.S. Supreme Court has agreed to review a case challenging gender-affirming care prohibitions for minors stemming from Tennessee and Kentucky. Twenty state attorneys general as well as the American Bar Association recently filed briefs in the case supporting the federal government’s constitutional challenge to the state bans, arguing that they violate equal protection laws. See Lockton’s recent Alert (opens a new window) on recent Supreme Court cases impacting employee benefits for additional details. A ruling is anticipated by June 2025.
PHARMACY AND PBM REGULATION
Oklahoma and 32 state attorneys general asked the U.S. Supreme Court to review a decision from the 10th Circuit holding that federal ERISA laws preempted Oklahoma state laws regulating pharmacy benefit managers (PBMs). Texas requested an opinion from its Attorney General on whether two specific Texas state laws are enforceable against PBMs. Tennessee confirmed its PBM regulations apply to self-funded ERISA plans.
Pharmacy Groups Petition SCOTUS to Review State PBM Legislation Again
A group of 32 state attorneys general led by Minnesota Attorney General Ellison have filed an amicus brief in support of Oklahoma’s petition asking the U.S. Supreme Court to review a case from the 10th Circuit Court of Appeals, which held that federal ERISA laws preempt Oklahoma state laws regulating PBMs (see PCMA v. (opens a new window)Mulready (opens a new window)). On July 29, 2024, PCMA also filed a brief arguing that the Court should deny Oklahoma’s petition for review because it is based on a distorted reading of the Court’s previous decision issued in Rutledge v. PCMA (see below).
The U.S. Supreme Court has issued several decisions in the recent past addressing ERISA preemption in PBM regulation. In 2020, the Court held in PCMA v. Rutledge that Arkansas could regulate PBMs and that ERISA preemption did not apply. In 2021, the Court furthered its position by remanding a North Dakota case, which had held that ERISA preempted the state’s attempt to regulate PBMs, for a new decision in light of its 2020 PCMA ruling.
Texas Legislator Asks Attorney General to Issue Opinion on Texas PBM Laws and ERISA Preemption
In May 2024, Texas Senator Charles Schwertner submitted a letter to Attorney General Paxton requesting opinions on whether two specific Texas laws generally imposing standards on health benefit plan issuers and PBMs acting on their behalf regarding employer plan designs and the manner in which they build network of participating pharmacies are (1) enforceable against a PBM administering benefits under an ERISA plan (and against an ERISA plan “issuer”), and (2) enforceable against a PBM or issuer where the plan is domiciled outside of Texas and the plan provides coverage to Texas residents and the PBM contracts with a network of providers that include Texas pharmacy providers. The Attorney General has until November 12, 2024 to issue an opinion, and the Attorney General’s office will accept comments from any interested party as part of the process.
Tennessee Confirms PBM Regulations Apply to Self-Funded ERISA Plans
The Tennessee Department of Commerce and Insurance in March amended PBM regulations enacted in 2023, reiterating its position that the regulations apply to PBMs administering self-funded ERISA plans. The amendment specifically states that the “definition of covered entity and of pharmacy benefits manager… clearly and unambiguously apply to self-insured entities and plans governed by ERISA.”
New State Bills Impacting ERISA Plans
California passed SB 966 in August 2024 which is on its way to the Governor for signature. The bill will restrict the ability of ERISA plans to offer limited networks, home delivery, and exclusive specialty. The only exemption included is for Taft-Hartley self-insured prescription drug plans. The bill, if signed, is effective January 1, 2025.
Kentucky also passed SB 188 earlier this year with several provisions relating to pharmacy; at this time, it appears only the pricing requirements will be enforced on ERISA plans. The rules will force NADAC pricing and minimum dispensing fees on non-chain pharmacies beginning in 2025 and all pharmacies beginning in 2027. Plan costs are expected to increase by 5-8% with this pricing structure.
Lockton comment: States are continually introducing hundreds of bills on PBM regulation every year, and consequently, this area is constantly in flux. State legislatures and courts continue to grapple with whether ERISA preempts state attempts to regulate PBM activities, and we expect to see much additional litigation in this space going forward. For more details on this topic, see Lockton’s recent webcast on the Power and Vulnerability of ERISA preemption (opens a new window). While it remains to be seen whether the U.S. Supreme Court agrees to review the 10th Circuit’s decision in the Oklahoma Mulready case, it would not be a surprise if the Court takes up the case given its previous involvement in PBM regulation cases underlying the 10th Circuit’s decision. See Lockton’s recent Alert (opens a new window) on Supreme Court cases impacting employee benefits for more background.
OTHER BENEFIT-RELATED UPDATES
Additional updates to state laws and programs impacting employee health and welfare benefits this year include standard rate updates to the San Francisco Health Care Security Ordinance and Washington Partnership Access Lines (WAPAL) Fund assessments for 2025, as well as a new portability law allowing Washington residents to continue participating in the Washington Cares Fund (WA Cares) long-term care program even if they move out of state. A 2024 ballot measure has been included for Washington residents to determine whether participation in WA Cares should be made optional.
California
The San Francisco Health Care Security Ordinance (opens a new window), a law requiring most San Francisco employers to spend a minimum amount on health care for employees who work 8 or more hours per week, has released its expenditure rates and exemption threshold for 2025. For large employers (all employers with 100+ workers), the 2025 rate is $3.85 per hour payable, up from $3.51 in 2024. For medium employers (businesses with 20-99 workers and nonprofits with 50-99 workers), the 2025 rate is $2.56, up from $2.34 in 2024. Small employers (businesses with 0-19 workers and nonprofits with 0-49 workers) continue to be exempt in 2025. Starting January 1, 2025, managerial, supervisory, and confidential employees who earn more than $125,405 per year (or $60.29 per hour) are exempt; the threshold is a slight increase over the 2024 threshold, which was $121,372 annually, or at least $58.35 per hour.
Washington
The Washington Partnership Access Lines Fund (“WAPAL”), an assessment program providing funding for behavioral health care, has reduced its assessment rates for 2025. Some employers, including self-funded plan sponsors, providing coverage to Washington residents are subject to reporting requirements on covered lives and payment of covered-lives assessment to help cover the costs of provider management of patients’ psychiatric needs. An annual rate setting meeting is held every May, and new rates are released in June. The covered lives assessment rate for fiscal year 2025 is $0.06, down from $0.07 in 2024, and will become effective with payments due on November 15, 2024.
The Washington Cares Fund (“WA Cares”) has announced this year that, thanks to a new law on benefit portability, Washington workers can choose to continue participating in the WA Cares Fund if they move out of state beginning in July 2026. To become an out-of-state participant, workers must have contributed to WA Cares for at least three years (in which they worked at least 500 hours per year) and must opt in within a year of leaving Washington. Benefits will become available for out-of-state participants starting in July 2030.
Changes to WA Cares may be on the way as Washington Initiative 2124 has landed on the November ballot. This measure would provide that employees and self-employed individuals must elect to keep coverage under the program and can opt out at any time. Individuals opting out would not be required to pay the payroll tax assessed on employees’ wages that funds the program. The initiative would also repeal the portion of the law exempting employees who purchased long-term care insurance before November 1, 2021.
Lockton comment: The WA Cares ballot initiative could prove to be significant should voters decide to allow the opt-out provisions to the program. If the initiative passes, these changes would require additional rulemaking by the Employment Security Department in order to update the program structure, and there are concerns that opt-out provisions would effectively repeal the program in its current state. If Washington workers opt out in droves, the program’s funding source – a payroll tax on workers’ wages – could be drastically reduced, which would compel the program to find another source of financing. Lockton will remain apprised of any changes and provide updates in our Employer Guide to WA Cares, available to Lockton clients, when available.
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Consulting group are not privileged under the attorney-client privilege.
