Roundup of selected state health developments, second-quarter 2021 

July 30, 2021

Through the second quarter of the year, states enacted a range of prescription drug laws on cost sharing and pharmacy benefit manager (PBM) regulation. Expanded telehealth use, availability and provider reimbursement parity also received attention. Some states added or clarified health plan assessments that apply to insured and self-insured plans and fund certain state health programs. New health insurance laws focus on cost sharing and mental health coverage. Two states — Colorado and Nevada — enacted public health options for state residents, but New York’s single-payer health plan proposal died in committee. Paid sick, family and COVID-19 leave laws continued to draw action in several locations. Other benefit-related issues include a New Jersey severance pay mandate, a New York requirement for participant cards identifying self-funded health plans, and a clarification of Washington’s long-term care (LTC) program.

Download the 14-page print-friendly PDF to read the full article with state-by-state developments. Here are highlights of the topics covered.

Prescription drugs

As COVID-19 issues receded, a focus on drug pricing and related costs attracted state lawmakers’ attention. The steep rise in prescription drug costs — insulin in particular — has spurred states to impose cost-sharing limits. The pace of new PBM laws accelerated in 2021 after the US Supreme Court held that ERISA doesn’t preempt Arkansas’s law regulating PBM pharmacy reimbursements. States have been looking at regulating other PBM activities and contract provisions that could withstand a preemption challenge.

State actions nationwide

The National Academy for State Health Policy (NASHP) has posted a chart of state drug-pricing laws since 2017 across multiple categories, including PBMs, transparency, importation and cost sharing. PBM laws accounted for 108 laws across 45 states, according to the report. As of July 7, 18 states imposed pharmacy cost-sharing restrictions, and 17 passed drug transparency laws.

The site also tracks the status of prescription drug proposals. Legislation proposed in 2021 through July 7 includes 109 PBM bills, 62 cost-sharing bills and 43 transparency measures under consideration or newly signed into law. The charts include bill and law information on drug importation, affordability reviews, unsupported price hikes and other pricing requirements.

Insulin limits

After the 2020 notice announcing Medicare’s temporary pilot program limiting cost sharing for insulin, several states have acted to impose similar caps on commercial health insurance. In the second quarter of 2021, Vermont added a monthly cap on insulin cost sharing in insured health plans. Arkansas sought to require that drugmakers share any coupons or cost savings for insulin only with the patient.


After last year’s US Supreme Court decision in Rutledge v. Pharm. Care Mgmt. Ass’n. (141 S. Ct. 474 (2020)), state lawmakers enacted or considered a wide range of restrictions and requirements for PBMs, including their contracts with participating pharmacies. At least 10 states enacted new or added to existing PBM laws. Some of the new provisions involved pharmacy reimbursements, bans on “steering” and spread pricing, increased transparency, application of third-party payments, pharmacy choice, and fiduciary obligations. In some cases, the extent to which these laws will impact self-funded ERISA plans — if at all — is unclear.


A drive to expand access to healthcare has prompted states to relax certain restrictions on telehealth services. At the same time, some are requiring reimbursement parity for in-person and telehealth providers rendering the same service in an insured plan. Telehealth expanded considerably during the COVID-19 pandemic, when many day-to-day in-person healthcare services shut down, and healthcare need was highest. Lawmakers who see the need for more healthcare resources have been advocating for increased access to telehealth.

Health plan assessments

Group health plan assessments in New Mexico, New York and Washington garnered attention in the second quarter. A state premium tax surcharge for insured plans in New Mexico and covered-lives fees for insured and self-funded plans in New York and Washington will help fund certain state healthcare programs.

Health insurance

States passed new health insurance laws related to cost sharing, mental health or both. Two states — Connecticut and Louisiana — will require third-party payments in insured plans to count toward the patient’s cost-sharing obligation. This type of state legislation has become a growing trend since the US Department of Health and Human Services issued guidance on the topic last year. That guidance clarified that group health plans and insurers may — but are not required to — count toward the out-of-pocket maximum any form of direct cost reductions, including coupons, that drug manufacturers offer to enrollees purchasing specific medications, regardless of whether a generic equivalent is available. Employers with insured, high-deductible health plans (HDHPs) underwritten in these states should review the new laws’ implications for eligibility to make or receive health savings account (HSA) contributions. New Mexico has banned cost sharing for mental health treatment. Washington requires gender-affirming treatment in compliance with federal law.

State health coverage initiatives

As federal healthcare reforms languish, at least three states considered or enacted initiatives in the second quarter. Colorado and New Mexico enacted public-option coverage that will be available on their health insurance exchanges. However, New York missed at another attempt to move forward on a single-payer health system.

Paid leave

States took action on paid leave laws, including sick leave, family and medical (PFML) programs and COVID-19 emergency leave. While some states took action to ban or delay certain paid leave mandates, such as delayed implementation of Oregon’s PFML program, others moved ahead, such as Seattle, Washington’s paid sick leave enforcement. Other state actions include Montana’s ban on local paid sick leave mandates, New Mexico’s paid sick leave requirement, and Virginia’s new short-term disability (STD) insurance provisions.

Other benefit-related developments

Other benefit-related issues received states’ attention in the second quarter. New Jersey’s severance mandate received a setback in a pending ERISA preemption challenge when a federal court denied the state’s effort to have the case dismissed. New York will now require insurers — including TPAs administering self-funded plans — to provide participants ID cards specifying whether the plan is insured or self-funded. Washington employers will soon have to begin collecting LTC program premiums from individuals who haven’t purchased their own coverage by Nov. 1, 2021.

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