Compliance and legal activity slowed this quarter compared to earlier in the year, due largely to the federal government shutdown from Oct. 1 through Nov. 12, as operations were curtailed across many agencies. Still, we saw meaningful movement in key areas: courts issued significant rulings shaping access to abortion and gender-affirming care across states, ballot measures advanced that could bring changes in 2026, and federal regulators signaled their priorities through proposed rules and reports. These developments demonstrate the continued instability in abortion and gender-affirming care policy as well as the likelihood of intensified regulatory and litigation activity into 2026.
Executive Summary |
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Abortion and reproductive care: This quarter saw legal and regulatory turbulence as courts, federal agencies and state legislatures advanced conflicting policies and legal challenges. Litigation over mifepristone access and back-and-forth state actions over constitutional amendments indicate the potential for significant changes in 2026. Gender-affirming care: Despite a slowdown in federal activity due to the shutdown, this quarter saw continued federal efforts to restrict gender-affirming care for minors and immediate legal challenges. At the same time, federal courts issued pivotal rulings centered on privacy and nondiscrimination issues, while states maintained their longstanding divide, resulting in little change to the overall national landscape. Other benefit-related updates: The state of Washington finalized several changes to its long-term care program effective January 2026, including expanded re-enrollment opportunities, new supplemental coverage options and simplified eligibility rules. |
NOTE: Self-funded ERISA plans are generally not impacted by state insurance laws and, therefore, no immediate action is required from employers on the information discussed below. We nevertheless recommend that employers review current benefits in conjunction with state mandates to ensure that plan offerings keep pace with market changes and continue to meet enrollee needs and expectations.
ABORTION AND REPRODUCTIVE CARE
Mifepristone slated to be a central issue in 2026
In late September, a Texas federal court granted motions by Texas and Florida to join the ongoing lawsuit challenging the Food and Drug Administration (FDA)’s approval of expanded access to mifepristone, including mail-order dispensing and telehealth prescriptions. The case, originally filed in January by Missouri, Idaho and Kansas, argues that these access pathways conflict with state laws requiring parental consent, in-person oversight and telehealth bans. Texas and Florida sought to intervene after recent developments, including Missouri’s constitutional amendment protecting abortion rights, Idaho’s pending ballot referendum that could overturn its ban and the Kansas Supreme Court’s affirmation of abortion rights earlier this year. The court’s September order allowed an amended complaint consolidating all five states’ claims that federal approval violates their laws.
On Oct. 1, the FDA quietly approved a second generic version of mifepristone, the abortion medication used in nearly two-thirds of U.S. abortions. The new product, manufactured by Evita Solutions, is deemed therapeutically equivalent to the brand name Mifeprex and is expected to be available in January 2026. This approval comes amid active legal and political scrutiny of mifepristone’s safety and access, including the recent challenges from Republican state attorneys general and calls for reevaluation by HHS Secretary Robert F. Kennedy Jr.
Meanwhile, the FDA has postponed its planned review of safety data for mifepristone until after 2026 midterm elections. The review was first reported in a U.S. Department of Health and Human Services (HHS) letter earlier this year and was initiated in response to a direct request from 22 state attorneys general seeking updated risk assessments. The delay was made at Commissioner Marty Makary’s request, despite prior commitments to complete the review in 2025. The study is expected to reassess the drug’s risk profile following litigation and political pressure over telehealth access.
Finally, Hawaii’s long-running challenge to the FDA’s restrictions on mifepristone reached a turning point this quarter. In August, plaintiffs led by the ACLU argued that the FDA’s Risk Evaluation and Mitigation Strategy (REMS) requirements are scientifically unjustified and disproportionately burden rural and low-income patients, asking the court to declare the restrictions unlawful. On Oct. 31, 2025, a federal court ruled that the FDA violated federal law by imposing restrictions unsupported by evidence and directed the agency to reconsider them. The restrictions remain in place for now while the FDA reviews its policy under the court’s order. This ruling is in direct contrast to a previous decision issued by a federal court in Washington, which held in July 2025 that the REMS requirements were lawful and within the agency’s discretion to impose as part of its drug safety authority.
LOCKTON COMMENT: The delay in reviewing mifepristone underscores the persistent divide among states as some are pressing the FDA to tighten restrictions on mifepristone while others are urging the agency to relax or entirely remove the restrictions. Conflicting court rulings also demonstrate uncertainty over the future of mifepristone access. While Hawaii’s decision requires the agency to justify or revise the restrictions, the Washington ruling affirms the FDA’s discretion to maintain them. For now, there is no immediate change to the requirements; they remain in effect nationwide. If courts continue to split, we expect further litigation and potential U.S. Supreme Court involvement. For plan sponsors, coverage policies and pharmacy networks should remain aligned with current REMS standards, but employers should monitor further shifts as the FDA responds to Hawaii’s order and completes its review next year.
State updates nationwide
Nearly a year after Arizona voters approved a constitutional amendment protecting abortion rights, providers and the ACLU filed suit in May 2025 to block older laws that allegedly conflict with the new protections. The challenge targets three statutes: one banning abortions based on fetal abnormalities, non-lethal diagnoses, gender or race; another requiring two separate clinic visits before care; and a third mandating an ultrasound and a minimum 24-hour waiting period before the procedure. An evidentiary hearing on a preliminary injunction was held in early November, in which the judge indicated he may consolidate injunction arguments into a permanent ruling on the merits. Closing arguments are scheduled for January 2026.
California enacted AB 260 on Sept. 26, 2025, expanding protections for abortion medication by allowing prescription labels to omit provider details, further shielding clinicians from out-of-state legal threats. The law affirms California’s authority over reproductive care and ensures continued access to drugs like mifepristone (even if federal approval changes after the FDA’s in-process review). The new law also requires pharmacies to log prescriber information that will only be accessible by subpoena. The measure is expected to have national impact, as many providers rely on California-based pharmacies. AB 260 was proposed as a direct result of a Texas lawsuit against a California doctor for providing abortion medication to a patient in Texas.
While Idaho’s abortion ban is still in place, an initiative to restore abortion rights in the state has cleared several procedural hurdles. In October, a judge approved revised language for a proposed ballot measure, teeing it up to appear on the November 2026 ballot if enough signatures are collected. If passed, the amendment would establish a statutory right to reproductive freedom and privacy, including abortion care, contraception, fertility treatment and related services.
Missouri has proposed a constitutional amendment for the November 2026 ballot that would reinstate the state’s abortion ban with limited exceptions; repeal voter-approved protections for abortion, IVF and contraception; ban gender-affirming care for minors; and require all reproductive health challenges to be heard in Cole County, Missouri. The ACLU of Missouri sued in July 2025, arguing the initial version of the ballot measure was misleading, deceptively titled “Amendment 7” (the same title as the 2024 amendment protecting abortion rights) and violated the state’s single-subject rule. On Sept. 20, 2025, a district court ordered revisions to the ballot language, ruling that while combining abortion and gender-affirming care provisions was permissible, the language must clearly state its intent to repeal the 2024 amendment. On Oct. 7, 2025, a judge approved the revised ballot language, making it almost certain the measure will be included on the November 2026 ballot.
Also in Missouri, an appeals court in October upheld a lower court’s injunction blocking enforcement of several abortion restrictions. As we previously reported, there has been a saga of procedural back-and-forth actions over Missouri’s abortion access since the November 2024 voter-approved amendment, which enshrined a right to abortion access through viability. The October court ruling allows abortion procedures to remain accessible in the state for now under the temporary order, but a final ruling in the ACLU-led lawsuit is expected in January.
In late September, a federal district court in Michigan dismissed a lawsuit brought by Right to Life of Michigan seeking to overturn the state’s 2022 voter-approved constitutional amendment protecting abortion access. The court found that the plaintiffs failed to show how the amendment violated the rights of fetuses or conflicted with other constitutional provisions.
North Dakota’s Supreme Court restored its state abortion ban in November after failing to reach the four-justice supermajority required to uphold a 2024 lower court ruling that struck down the previous prohibition and permitted abortion until viability. Because only three of four justices agreed that the law was unconstitutional, the state prohibition of abortion remains in place. The current state law prohibits all abortions with only exceptions for life- or health-preserving measures or cases of rape or incest up to six weeks. Providers face criminal liability; however, patients are shielded from prosecution.
Texas’s extraterritorial enforcement efforts hit a roadblock in New York this quarter. After the Texas attorney general sued a New York provider for mailing abortion pills to a Texas patient, the New York county clerk twice refused to file Texas’s judgment. Texas sued, and on Oct. 31, 2025, the New York Supreme Court dismissed Texas’s case, affirming the clerk’s decision under the state shield law. The ruling leaves unresolved Texas’s argument that the U.S. Constitution’s Full Faith and Credit Clause requires states to honor each other’s judgments, while reinforcing New York’s stance that its shield law protects providers engaged in lawful telemedicine care, even for patients in other states.
LOCKTON COMMENT: State abortion policy remains in flux as courts and advocates battle over the scope and impact of constitutional amendments passed in 2024. Much of this quarter’s activity centered on legal challenges to older statutes, ballot language disputes, and preparations for new amendments slated for the 2026 ballot. Employers and plan sponsors should anticipate further changes as states revisit and refine constitutional protections in the coming year.
GENDER-AFFIRMING CARE
Federal actions on gender-affirming care continue despite regulatory slowdown
In a significant development since our Q3 Alert (opens a new window), multiple federal courts have blocked the Department of Justice (DOJ)’s attempts to obtain private medical records of transgender minors from hospitals providing gender-affirming care. The DOJ had previously issued more than 20 subpoenas nationwide, demanding extensive patient and provider data to support “fraud investigations.” In November, a district court sided with the Children’s Hospital of Philadelphia, issuing a sweeping order rejecting subpoenas seeking names, Social Security numbers, addresses and detailed clinical notes of minors treated for gender dysphoria. The ruling held that the DOJ lacked statutory authority for such broad demands and emphasized that the requested records fell at the highest end of the intimate and personal spectrum. In another case, a federal judge quashed a DOJ subpoena to Boston Children’s Hospital, finding it was issued in bad faith and aimed at discouraging access to gender-affirming care rather than investigating legitimate billing fraud.
LOCKTON COMMENT: These rulings emphasize the strength of HIPAA privacy protections and state shield laws in limiting federal reach over gender-affirming care records. Litigation outcomes in other ongoing cases could set precedent on whether federal enforcement actions can override state privacy and nondiscrimination mandates.
The Trump administration in early November announced plans to issue HHS rules that would dramatically restrict access to gender-affirming care for minors nationwide. The proposals would prohibit Medicaid and CHIP reimbursement for gender-affirming care for patients under 18 (or 19 for CHIP); block all Medicaid and Medicare funding for hospitals that provide pediatric gender-affirming care, an unprecedented move that could force hospitals to end such programs entirely; and mandate coverage of “faith-based counseling” as an alternative to gender-affirming care. These rules are expected to enter a public comment period before finalization and, if passed, could create a de facto national ban on gender-affirming care, even in states that currently protect access. Legal challenges are anticipated immediately upon publication.
Finally, on Dec. 3, 2025, HHS finalized its report on pediatric gender-affirming care, concluding that medical interventions such as puberty blockers, cross-sex hormones and surgeries pose significant long-term risks for minors. The report recommends prioritizing psychotherapy over medical treatment for youth experiencing gender dysphoria. Major medical associations have strongly disputed these findings, maintaining that gender-affirming care remains evidence-based and essential for patient well-being.
LOCKTON COMMENT: Federal activity on gender-affirming care throughout 2025 reflected an aggressive, multi-pronged approach using executive orders, rulemaking, agency enforcement and litigation all aimed at restricting access for minors and reshaping coverage obligations. While courts have pushed back on DOJ subpoenas and privacy intrusions, the administration’s proposed HHS rules and recent directives convey its persistence in advancing this initiative. Looking ahead to 2026, we expect to see further rulemaking to push federal funding restrictions and coverage exclusions; expanded litigation challenging both federal enforcement actions and state shield laws; and enduring uncertainty for employers and carriers as conflicting federal and state mandates create risk, particularly in states that protect access to gender-affirming care. Employers should remain engaged, track regulatory shifts and evaluate plan language and vendor contracts to ensure alignment with evolving requirements.
Litigation updates
In late October, the U.S. District Court for the Southern District of Mississippi struck down the Biden administration’s rule under Section 1557 of the Affordable Care Act that had expanded nondiscrimination protections to include gender identity and sexual orientation. The decision vacates the rule nationwide, removing federal requirements for insurers and providers to cover gender-affirming care. The court relied on the U.S. Supreme Court’s Skrmetti decision, holding that denial of gender-affirming care is based on diagnosis, not sex, and cannot be compelled under Section 1557. As a result, gender identity protections under ACA Section 1557 are now unenforceable.
In November, the U.S. Court of Appeals for the Ninth Circuit issued a significant ruling in litigation against Blue Cross Blue Shield of Illinois over administration of categorial exclusions for gender-affirming care in ERISA health plans. The court affirmed that third-party administrators (TPAs) can be held liable under ACA Section 1557 for administering discriminatory plan terms, even when exclusions originate from the plan sponsor; ERISA fiduciary duties do not override federal nondiscrimination obligations; and the Religious Freedom Restoration Act (RFRA) cannot be used as a defense in private lawsuits. The court directed the lower court to reconsider its sex discrimination analysis in light of the U.S. Supreme Court’s recent Skrmetti decision.
LOCKTON COMMENT: These rulings highlight the volatility in federal enforcement and judicial interpretation of ACA Section 1557 as it relates to gender-affirming care. The Mississippi decision eliminates nationwide enforcement of gender identity protections under Section 1557, signaling a retreat from prior federal guidance. Conversely, the Ninth Circuit ruling reinforces that TPAs and plan administrators remain exposed to liability under existing interpretations of Section 1557. Employers and TPAs should proactively review plan language for categorical exclusions, assess litigation risk and prepare for continued discrepancies and potential Supreme Court involvement in 2026 if federal court splits persist.
Other Updates to State Gender-Affirming Care Laws
As 2025 comes to a close, 27 states now restrict or ban gender-affirming care for minors, and 16 states and Washington, D.C. have shield laws or executive orders protecting access to care and/or protecting providers from out-of-state enforcement actions. Five states currently mandate gender-affirming care in essential health benefit (EHB) benchmark plans, however HHS final rules from June 2025 prohibit gender-affirming care as EHBs beginning with plan year 2026. Twenty-one states filed lawsuits to block the law, but a Massachusetts court denied their request in October, so the rule will take effect in January.
In October, California enacted SB 497, strengthening protections for individuals and entities providing or facilitating gender-affirming health and mental health care. The law bars healthcare providers from releasing gender-affirming care records in response to out-of-state subpoenas or legal requests rooted in “anti-trans” laws and prohibits California courts from enforcing such subpoenas. It also blocks law enforcement from using prescription drug data to criminalize people who receive or provide gender-affirming care.
California also vetoed a bill in October over cost concerns and regulatory overreach that would have required health insurers to cover gender-affirming care deemed medically necessary by providers. The measure was backed by LGBTQ+ advocates and major medical associations and aimed to prevent insurers from denying coverage based on internal guidelines that conflict with accepted standards of care.
North Dakota upheld its state ban on gender-affirming care for minors in October. The state supreme court said that the law discriminates based on age and medical purpose, not sex, and therefore does not violate the state constitution. As a result, the state prohibition, which bars surgeries, hormone treatments and puberty-blocking drugs for individuals under 18, remains in effect.
LOCKTON COMMENT: State-level activity on gender-affirming care slowed considerably in Q4, largely for structural reasons. The October and November federal government shutdown diverted legislative and regulatory bandwidth, leaving many states focused on budgetary and operational priorities rather than health policy changes. Second, the U.S Supreme Court’s June Skrmetti decision provided a clear legal framework for upholding state bans related to minors, prompting courts and legislatures to pause new initiatives while litigation plays out under that precedent. Many states with pending bills or challenges opted to wait for clarity on how lower courts will apply Skrmetti and whether additional federal rules, such as HHS’s prohibition on gender-affirming care as an essential health benefit starting in 2026, will withstand ongoing lawsuits. Looking ahead to 2026, we expect renewed momentum once these uncertainties are resolved. States with existing prohibitions may move to tighten enforcement or expand restrictions to related services, while states with shield laws could strengthen provider protections in response. At the same time, federal agency actions will likely continue to spur litigation and advocacy efforts, creating ripple effects at the state level.
OTHER BENEFIT-RELATED UPDATES
Washington
Effective Jan. 1, 2026, several important changes will take effect under the state of Washington’s long-term care program, WA Cares. Employees who previously opted out with private long-term care insurance before Nov. 1, 2021, will have the opportunity to cancel their exemption and rejoin WA Cares between Jan. 1, 2026 and July 1, 2028. The program will also introduce a framework for supplemental private long-term care policies, with insurer filings expected in spring 2026 and products anticipated by summer. Eligibility rules have been simplified as well: the prior requirement of 10 years of contributions without a five-year break has been replaced with a total of 10 years of contributions, regardless of breaks. Effective July 2026, workers who relocate out of Washington may opt to continue coverage if they contributed for at least three years (working 500 hours or more per year) and elect to participate within one year of leaving the state. Benefits for those participants will be available beginning in July 2030. Finally, a pilot program will be developed to test benefit delivery systems before they become widely available. Applications will be accepted for interested parties between Jan. 6, 2026 through Feb. 28, 2026.
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.
