California laws provide a peek into 2026 legislative landscape 

Promotional trailers highlight what to expect from feature-length movies. Similarly, new California laws often provide a sneak preview of what to expect from statehouses the following year. Now that Governor Gavin Newsom has put down his pen and veto stamp for 2025, let’s review seven laws that may affect what other states do in 2026:

1. Prescription drugs. SB 41 is a comprehensive Pharmacy Benefit Manager law that bans spread pricing, requires a 100% rebate pass-through to the payer or program and imposes restrictions on PBM compensation for health plans. It specifically imposes a fiduciary duty on PBMs administering self-funded plans “to be fair and truthful toward the client, to act in the client’s best interests, to avoid conflicts of interest, and to perform its duties with care, skill, prudence, and diligence.” More states will likely consider the PBM standard of care next year, along with other PBM restrictions, as they navigate ERISA preemption waters. The law takes effect for plan years starting in 2026.

2. Preventive care. AB 144 (now in effect) requires health plans to cover preventive care services that are either recommended by the federal government as of Jan. 1, 2025, or recommended by the California Department of Public Health, without cost sharing or prior authorization. See this Department of Managed Health Care guidance. California is not alone in its concerns about the direction of preventive care coverage.

3. Paid leave. SB 590 expands the state’s Paid Family and Medical Leave and Paid Sick and Safe Leave statutes. For PFML, the state added designated persons to the family member definition, effective July 1, 2028. This continues a trend among other states with PFML. For PSSL, and other job-protected unpaid leave, AB 406 (now in effect) allows more permitted uses, namely when an employee or family member is a victim of specified crimes and any judicial proceeding related to that crime. PSSL is also available for appearing in court to comply with a subpoena or other court order and jury service. Look for other states to add more qualifying reasons to paid leave statutes. Additional details are available in comprehensive articles on PFML and PSSL.

4. Abortion medication. AB 260 (now in effect) protects the use of mifepristone and related abortion medications, and includes coverage requirements for health plans. This mandate applies regardless of any actions taken at the federal level by the Department of Health and Human Services or its agencies. Look for other states to address this issue, either following or rejecting California’s lead.

5. Prior authorization. SB 306 addresses an increasingly scrutinized insurance practice. Insurers must provide preauthorization data – including services subject to prior authorization and the rate of approval – to the state by July 1, 2026. By Jan. 1, 2028, and after consultation with stakeholders, services approved at least 90% of the time statewide will be exempt from prior authorization, except in situations of fraud or inappropriate care. Some exceptions apply, including certain outpatient prescription drugs in a formulary.

6. Fertility coverage. AB 116 extends the effective date of last year’s fertility coverage mandate from July 1, 2025, to Jan. 1, 2026 and serves as a dual reminder: first, that mandatory fertility coverage in the fully insured market is becoming more mainstream; and second, that the devil is in the details, as insurers needed sufficient time to determine the specific services that must be covered. California also added fertility coverage, as well as durable medical equipment and hearing aids, to its state benchmark plan for the Affordable Care Act Health Insurance Marketplace, Covered California, effective for 2027.

7. Insulin coverage. SB 40 makes California the latest state to address insulin costs, requiring health plans to charge no more than $35 for a 30-day supply, effective for large group market plan years starting in 2026, and 2027 in the small group and individual markets. The bill also prohibits step therapy prerequisites to insulin coverage and requires coverage of at least one insulin for a given drug type in all forms and concentrations. Currently, about 20 states lack a health plan insulin cap. Expect that number to decrease next year.

Note: The health plan legislation above applies to fully insured plans and HMOs and does not apply to self-funded ERISA plans.

Movie trailers are useful, but we have to see the full movie before giving a thumbs-up/thumbs-down review. Likewise, we must wait until next year to see if these California laws have legs that traverse beyond the state’s borders.