Roundup of selected state health developments, fourth-quarter 2019

Connecticut Enacts Paid Family and Medical Leave

As 2019 came to a close, efforts to expand health coverage spurred initiatives in two states — Colorado and Georgia — while five other states and Washington, DC, moved forward with their individual health coverage mandates. State and federal regulators continued to explore prescription drug importation to curb drug costs. States also wrestled with potential limits on their authority to regulate pharmacy benefit managers (PBMs).

Insurance activity near year-end focused on a range of topics: balance-billing, prescription drug cost limits, mental health parity, reproductive health and association health plans (AHPs). Paid leave laws also garnered states’ attention, along with various issues that have benefit implications, such as employee vs. independent contractor classification, employer health plan reporting, state tax limits on commuter fringe benefits and coordination of benefits with automobile insurance.

Here are highlights from the quarterly roundup. Download the 20-page print-friendly PDF for summaries of all developments and links to related resources.

State coverage initiatives

Initiatives for expanding and stabilizing health coverage received attention again last quarter. Colorado is accepting comments on establishing a public health insurance option. Georgia sought comments on expanding Medicaid and obtaining an innovation waiver under the Affordable Care Act (ACA) for a reinsurance program.

Individual coverage mandate

The federal individual health coverage mandate currently carries no penalty, and its validity is facing a court challenge. However, five states and Washington, DC, require residents to maintain minimum health coverage or face tax consequences. Three of these jurisdictions — Massachusetts, New Jersey, and Washington, DC — require plan sponsors to submit coverage reports to local tax authorities this year. Vermont requires only individual reporting, not employer reporting. California and Rhode Island have posted guidance for residents who must maintain coverage beginning in 2020, but won’t require employer reports until 2021. In addition, Massachusetts has amended its coverage standards for 2020, and Washington, DC has posted regulations outlining minimum essential coverage (MEC) requirements.

Prescription drugs

Prescription drug prices continued to gain attention in the fourth quarter of 2019. At the federal and state levels, importing drugs from Canada received consideration. States also persisted in pursuing ways to regulate PBMs.

Importation

Efforts to import less expensive drugs moved forward with a proposed Food and Drug Administration (FDA) rule that would allow a state to work with federal regulators to establish a program. Vermont and Florida have submitted importation proposals to the FDA. Separate draft guidance would allow manufacturers to obtain a national drug code for an FDA-approved drug originally intended for a foreign country’s market. This would “provide [manufacturers] an additional avenue” to sell drugs at a lower cost in the US market.

States and certain other nonfederal governmental entities could submit proposals to import prescription drugs for FDA review and authorization under newly proposed rules. Amended federal regulations would allow importation of certain prescription drugs from Canada. An importation program could be cosponsored by a pharmacist, a wholesaler or another jurisdiction. FDA approval would require evidence that the importation program will significantly reduce costs for American consumers without creating any risk to public health and safety. Comments on the proposal are due by March 7, 2020.

PBMs

An Arkansas law restricting PBM rates will undergo US Supreme Court review. Illinois joined a growing list of states regulating PBMs. However, New York’s governor vetoed similar legislation, citing potential conflict with federal laws.

Insurance

Action on insurance laws in the fourth quarter of 2019 addressed “surprise” balance-billing, prescription drug and mental health coverage, reproductive health, and AHPs. State insurance laws don’t generally apply to self-insured ERISA plans.

Balance-billing

While Congress debates legislation to curb surprise medical bills from out-of-network (OON) healthcare providers, states have continued to address the issue in insured plans. Missouri and New Jersey regulators outlined arbitration and disclosure obligations under existing surprise billing laws. New York and Ohio focused on new laws.

Prescription drug costs and coverage

Prescription drug costs and availability remain a priority in state-regulated insurance plans. California will facilitate prescription-free HIV prevention medication. Illinois has set a cost-sharing limit on insulin.

Mental health

Two states took action on insurance coverage for mental health and substance abuse treatment. Connecticut legislators set parity requirements for nonquantitative treatment limits in insured health plans. New York health insurance regulators outlined expanded coverage requirements for substance use disorder (SUD) treatments.

Reproductive health

Reproductive health continues to draw attention as state lawmakers remain apprehensive about the fate of related federal regulations and patient protections. In the fourth quarter, Delaware regulators outlined contraceptive coverage and cost-sharing requirements for insured plans. New Jersey added a fertility-preservation mandate similar to laws in other states.

Association health plans

As the Trump administration’s AHP rules face a continuing challenge in the courts, several states have taken positions on these plans for their own residents. A federal court struck down a portion of the federal regulations, known as Pathway 2, but left standing the Pathway 1 rules allowing bona fide associations to form AHPs to avoid small group rates and restrictions (New York v. US Dep’t of Labor, No. 18-1747 (D.D.C. March 28, 2019). The case is currently on appeal. Three states — Arizona, Florida and North Carolina — have passed laws allowing groups to establish Pathway 2 AHPs, despite the court decision invalidating that part of the federal rules. California regulators have announced the state won’t allow AHPs authorized by the federal rules, regardless of the case’s outcome.

Paid leave

California and Hawaii announced their 2020 rates for short-term disability and paid family leave. Colorado’s family and medical leave insurance (FAMLI) task force posted preliminary recommendations for a possible paid leave program. Nevada provided guidance for its new paid time-off accrual law. Washington, DC, published paid leave notices and posters for employers to display at worksites.

Other benefit-related developments

A mix of other benefit-related developments emerged in the fourth quarter. California posted guidance on its controversial law that reclassifies certain independent contractors as employees, effective Jan. 1, 2020. Massachusetts required certain employers to report health plan information to state regulators. Massachusetts also announced state tax limits for employee transit benefits. In Michigan, a motor vehicle insurance law revised coordination of benefits with health plans.

Catherine Stamm
by Catherine Stamm

Principal, Mercer’s Law & Policy Group

Katharine Marshall
by Katharine Marshall

Principal, Mercer’s Law & Policy Group

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