Overview
The world of health benefits is constantly evolving. Recent policy shifts and legislative developments are expected to impact the economic landscape and have significant implications for employer plan sponsors, insurers, third-party administrators (TPAs), and individuals covered by employer-sponsored health plans. This article provides an overview of the current landscape, highlighting key updates and strategic considerations for navigating these changes.
In Depth
Recent legislative updates
Telehealth HDHP safe harbor: Retroactive to January 1, 2025, high-deductible health plans (HDHPs) may continue to cover telehealth and other remote care services without making participants ineligible for health savings account (HSA) contributions.
Section 1557 and gender-affirming care: Federal rules may soon reduce healthcare nondiscrimination protections that apply to gender-affirming care. State policies vary widely. Some require coverage while others restrict it, depending on the type of health benefit plan. Plan sponsors, insurers, and TPAs should review current coverage, and employers should understand which states their employees live in to manage both compliance and employee needs.
State-level PBM regulation: New state laws are targeting pharmacy benefit managers (PBMs), including rules related to drug pricing and rebate transparency. These laws may conflict with Employee Retirement Income Security Act of 1974 (ERISA) preemption protections. Compliance obligations may vary depending on where employees are located. Plan sponsors should consult with counsel to determine whether and how to respond to state disclosure requests.
Preventive care coverage: The Affordable Care Act’s requirement that plans cover certain preventive services with no cost-sharing remains in place for now. Future legal challenges are possible, however, especially for services such as contraception and PrEP. Stay informed to avoid last-minute plan disruptions.
Other updates to plan design and administration
Beginning on January 1, 2026, individuals participating in certain direct primary care arrangements can still contribute to an HSA and use HSA funds to pay for certain direct primary care fees up to applicable limits. Many employers continue to explore travel benefit programs to help employees access restricted care – particularly gender-affirming or reproductive services – across state lines. While this signals a supportive culture, it also requires careful legal vetting, given the evolving landscape of state-level restrictions and potential liability concerns.
Evolving health benefits landscape: Economic impact and risk areas
Recent changes to Medicaid eligibility and tax credits may increase the number of uninsured individuals, which could lead to higher enrollment in employer-sponsored plans and increased overall costs. At the same time, hospitals and providers losing revenue may raise prices for services to private plans, which can result in higher negotiated rates.
Enforcement and litigation risks are growing, and employers need to be ready:
- Mental health parity: Although the US Departments of Labor, the Treasury, and Health and Human Services have paused enforcement of the mental health parity (MHP) 2024 final rule, health plans must continue to comply with the previously issued 2013 final rule. Plan sponsors should continue to create and review MHP documentation, including the nonquantitative treatment limitation analysis that is still required, to ensure compliance.
- Fiduciary oversight: More lawsuits are alleging that employers failed to properly oversee their health plan vendors, such as PBMs. This highlights for plan sponsors the importance of having a clear plan governance structure and documenting key decisions about your plan.
Strategic considerations for plan sponsors
Three strategic considerations can help stakeholders navigate this environment effectively:
- Stay agile: With executive orders shaping agency action and rulemaking timelines accelerating, your benefits strategy needs flexibility. Being proactive rather than reactive can make a material difference.
- Double down on plan governance: As ERISA fiduciary litigation increases, maintaining a well-documented governance structure and decision-making record is no longer optional. It’s essential.
- Support your people, smartly: Benefits such as medical travel support signal inclusion and care. Be sure to consult counsel about plan design and delivery to ensure compliance across multiple jurisdictions and mitigate potential liability.
For more information or to discuss how the changing benefits landscape impacts your organization, contact the authors of this article or your regular M+ or McDermott contact.
