Roundup of selected state health developments, third-quarter 2021 

October 22, 2021

States clarified or updated health plan reporting and assessment obligations during the third quarter of 2021. Prescription drugs garnered significant attention as state lawmakers continue to tackle ever-increasing costs. Lawmakers addressed a range of health insurance issues, with special focus on aligning mental health and substance use disorder coverage with recent federal developments. Paid family and medical leave (PFML) and COVID-19-related paid leave laws received updates, and Colorado’s high court weighed in on use-it-or-lose-it vacation policies. Other benefit-related activity included a court ruling against California’s gig worker law, an Illinois health plan disclosure obligation and a step forward for an Oregon public health option.

Download the 14-page PDF to read complete details. Here are highlights of what’s covered.

Health plan reporting and assessments

San Francisco has updated its mandatory health care expenditure (HCE) rates for 2022. The city also has clarified which employees are covered by the requirement, even if working remotely due to public health orders. Massachusetts has updated its minimum creditable coverage (MCC) standards for employers whose plans cover Massachusetts residents. Washington has announced the covered-lives assessment rate for health plans — including self-funded plans — that cover Washington residents. Seattle has set its 2022 rates of hotel industry health coverage expenditures. The 9th US Circuit Court of Appeals has denied an en banc appeal looking to find ERISA preempts Seattle’s law.

Prescription drugs

Prescription drug costs continue to rankle state lawmakers. After the US Supreme Court last year ruled that ERISA doesn’t preempt a state law regulating pharmacy benefit manager (PBM) payments to pharmacies (Rutledge v. Pharm. Care Mgmt. Ass’n, No. 18-540 (Dec. 10, 2020)), states have become more assertive in attempting to regulate the industry. While some of these efforts clearly apply only to insured plans, the extent to which self-funded ERISA plans must comply is unclear in other cases. Illinois will focus efforts on a flat-dollar coverage option in insured products. Oregon has authorized an affordability board that will study the impact of prescription drug costs on premium rates. A recent Tennessee bulletin noted that the state’s PBM law doesn’t provide an exemption for self-funded plans. Texas has new restrictions on certain PBM practices, while Wisconsin has added PBM registration and reporting obligations.

Health insurance

State lawmakers took on a range of issues regulating insured health plans. California will require large group health plans to cover medically necessary basic healthcare services. Illinois extended fertility insurance benefits to same-sex couples and single individuals. Illinois also set certain parameters for coverage for telehealth services. Rhode Island added a cost-sharing cap for insulin. In addition, Colorado, Illinois and Oklahoma took steps to further mental health coverage. These insurance laws don’t apply to self-funded ERISA plans.

Mental health parity

Two recent events spurred state lawmakers and regulators to step up enforcement of mental health coverage mandates. First, Congress enacted the federal Consolidated Appropriations Act, 2021 (CAA) (Pub. L. No 116-260) requiring group health plans to prepare a comparative analysis of any nonquantitative treatment limits (NQTLs) that apply to mental health/substance use disorder and medical/surgical benefits. Second, a federal court held that a mental health benefit administrator applied overly narrow guidelines when determining whether certain mental health services conformed to generally accepted standards of care (Wit v. United Behavioral Health, No. 14-cv-02346-JCS (N.D. Cal. March 5, 2019)).

Under recent legislation, Colorado will require no-cost annual mental health wellness exam coverage. Illinois will ban limits on mental health coverage and require insurers to follow certain medical necessity standards. Oklahoma will ban benefit and age limits for applied behavioral analysis (ABA) in autism treatment coverage.

Paid leave

California has extended its current state disability insurance (SDI) and paid family leave (PFL) benefit rates for one more year. The Colorado high court has determined employer-provided vacation programs can’t include use-it-or-lose-it provisions. Colorado regulators have issued draft rules to implement the state’s voter-approved PFML law. Massachusetts and Rhode Island have posted PFML rates for 2022. Rhode Island also has extended the duration of allowable paid family leave. New Hampshire has enacted its own unique voluntary PFML program. State and local governments have continued to update mandatory paid leave requirements related to COVID-19.


California’s supplemental paid sick leave mandate expired at the end of September, but Massachusetts has extended its COVID-19 emergency paid sick leave requirement until April 2022. Many local emergency paid leave provisions related to COVID-19 have expired, while others — like Los Angeles County’s mandate — have been extended. Cook County, IL, has enacted an ordinance establishing COVID-19 vaccination rights for employees, adding to the growing list of state and local laws with which employers must comply. For more, see States, cities tackle COVID-19 paid leave (regularly updated).

Other benefit-related issues

Other state activities may affect employee benefit plans. California’s gig worker law was thrown back into limbo by a state court. Illinois is calling for employers — including those that self-fund their group health plans — to disclose certain health coverage information to new hires and compare plan benefits to the state’s required essential health benefits (EHBs). Oregon is looking into establishing a public health coverage option for state residents.