Federal Health & Welfare Updates

On November 26, 2025, in the closely followed case of Lewandowski v. Johnson & Johnson, et al., a New Jersey district court dismissed two amended ERISA fiduciary breach claims filed against defendant Johnson & Johnson, in its capacity as group health plan sponsor, and its benefit committee (collectively, J&J). The court determined that the participant plaintiffs had (once again) failed to establish legal “standing” to proceed with the claims. The ruling is good news for J&J and group health plan sponsors, generally.  

The J&J class action lawsuit received widespread attention when it was originally filed in 2024; previously, ERISA fiduciary breach cases largely targeted only retirement plan fiduciaries. Essentially, the plaintiffs claimed that J&J breached its fiduciary duties by failing to prudently manage its prescription drug plan and negotiate more favorable drug pricing and PBM fees, which increased plan costs and resulted in higher participant premium payments and cost-sharing. (Please read our article on the 2024 J&J case filing.) 

However, in January 2025, the court found that the plaintiffs lacked standing to pursue the claims because the allegations were too speculative and did not show how the defendants’ actions resulted in harm to participants in the form of higher premiums and cost-sharing. (For further information, please read our article on the court's prior ruling.) Subsequently, the plaintiffs filed two (second) amended complaints with the court.  

In its November 2025 ruling, the court determined that the plaintiffs’ second amended claims still did not explain how the purportedly excessive PBM fees paid by the plan had any impact on their contribution rates and out-of-pocket costs. The court noted that the plaintiffs’ claims focused on the prices they paid for 57 drugs in a formulary of thousands of drugs and that the plan paid most of their benefit costs, making it difficult to establish a causal connection between increases in PBM fees and their premiums and cost-sharing. Moreover, the court observed that many variables unrelated to prescription drugs, such as a participant’s tobacco usage, coverage tier, and compensation, can affect contribution rates. Finally, the court emphasized that the plan fiduciaries had discretion to set contribution rates, and that the court could not alter the plan terms and require the defendants to lower the rates. In reaching its conclusion, the court relied heavily on a recent Minnesota district court ruling in a similar ERISA fiduciary breach case, Navarro v. Wells Fargo. (For further details, please read our article on the Wells Fargo decision.) 

Accordingly, the court granted J&J’s motion to dismiss the claims because the plaintiffs lacked standing to pursue their case. The court’s dismissal was without prejudice, meaning the plaintiffs have a chance to file a third amended complaint to correct the standing deficiencies.  

Employer Takeaway 

The court’s decision, although perhaps not surprising, is still welcome news for employers concerned with the recent wave of fiduciary breach lawsuits against group health plan sponsors. Thus far, the court rulings in these cases have been consistent, and plaintiffs have been unable to establish standing to proceed with their claims.  

Nonetheless, class action lawyers will likely continue to file fiduciary breach lawsuits and test new legal theories. Additionally, a recent U.S. Supreme Court decision has made it easier for plaintiffs to pursue certain types of claims against plan sponsors. (Please read our article on the Supreme Court's decision.) Therefore, plan sponsors should continue to review their own ERISA fiduciary governance practices to ensure they are prudently fulfilling their fiduciary obligations to their plans and participants, particularly with respect to the selection and monitoring of service providers. For further information on ERISA fiduciary governance, please ask your broker or consultant for a copy of the NFP publication ERISA Fiduciary Governance: A Guide for Employers. 

However, there are efforts underway to curb meritless ERISA litigation. Specifically, the recently appointed head of the DOL’s Employee Benefit Security Administration, Daniel Aronowitz, has pledged to end “litigation abuse” and provide clearer regulatory guidance to employers to help them fulfill their fiduciary obligations. There are also proposals in Congress to deter unwarranted ERISA lawsuits. Hopefully, these measures will help to fulfill ERISA’s dual goals of protecting participants’ rights to benefits while also creating a fair and business-friendly legal and regulatory environment for employers that offer the benefits. 

We will continue to monitor the litigation and related developments and report relevant updates in our biweekly Compliance Corner. 

Read the court’s decision on Lewandowski v. Johnson & Johnson, et al.

On November 12, 2025, the longest government shutdown in U.S. history finally ended. During the shutdown, executive agency activity slowed, or ceased, impacting employers in a variety of ways. From an employee benefits perspective, the release resulted in a delay of agency guidance, including important healthcare transparency rules.

However, transparency, particularly regarding prescription drug coverage, remains a priority of the Trump administration. Accordingly, now that government operations have resumed, employers should anticipate the release of significant transparency guidance in the coming days and should understand the potential impact on their prescription drug plans.

Price Transparency Rules

First, employers should expect the issuance of proposed price transparency rules, which will likely include provisions to implement the prescription drug machine-readable file (MRF) requirement under the Transparency in Coverage final rule (TiC rule).

As background, in February, President Trump signed an executive order that directed the DOL, HHS, and IRS (the departments) to fully implement and enforce existing price transparency rules, including the TiC rule. Subsequently, the departments issued a request for information to gather stakeholder views on achieving the order’s objectives. Please see our March 4, 2025, article on Executive Order 14221 and May 28, 2025, healthcare transparency update.

The TiC rule requires nongrandfathered group health plans and insurers to publicly post monthly MRFs of their in-network (INN) negotiated rates, historical out-of-network (OON) allowed amounts and charges, and prescription drug INN rates and historical net prices. The MRFs can then be accessed by data analytics firms who compile, analyze, and reorganize the pricing data into tools that employers can use to comparison shop for healthcare coverage.

As recognized by the order, the TiC rule has yet to be fully enforced. Notably, the departments have never implemented the prescription drug MRF requirement, largely due to litigation seeking to block it from taking effect. Additionally, although plans and insurers have been posting MRFs of INN and OON medical prices since 2022, the reported data is not always accurate, complete, or consistent. The proposed rules are expected to address these deficiencies and perhaps establish a timeline for implementing the prescription drug MRF requirement.

Service Provider Compensation Disclosure Regulations

Next, employers should anticipate the release of proposed rules to implement the CAA 2021 service provider compensation disclosure requirements, particularly with respect to PBMs.

In April, the president signed another executive order, which was specifically aimed at lowering prescription drug prices and increasing transparency and competition in drug markets. Among other items, the order directed the DOL to propose regulations pursuant to ERISA § 408(b)(2) to help employers better understand compensation received by their PBMs. Please see our April 22, 2025, article on Executive Order 14273.

Under the CAA 2021, service providers that expect to receive $1,000 or more in connection with brokerage or consulting services to an ERISA group health plan must provide a written compensation disclosure to the employer/plan fiduciary before entering a contract with the plan. The disclosure is designed to help the employer fulfill their fiduciary obligation to prudently select service providers and determine if their compensation is reasonable.

To date, no formal guidance has been issued to implement these disclosure requirements, despite the complexity of certain compensation structures, particularly with respect to PBMs. Thus, questions have arisen regarding whether employers are receiving the complete and clear information needed to assess service provider compensation. The proposed regulations are expected to address these concerns regarding the disclosures provided by PBMs, and perhaps other service providers.

Employer Takeaway

Employers should expect a flurry of proposed transparency rules and regulations in the near future. Although the above is intended to provide a general overview of what is likely to come, employers will need to await the actual release of the guidance to understand the full scope and details. Additionally, the guidance may be modified prior to finalization, based on comments received by stakeholders, including employer industry groups.

Of course, employers, as plan fiduciaries, will need to ensure their plans comply with the rules, once finalized. For the price transparency rules, employers will need to consult with their carriers, TPAs, PBMs, and other service providers to confirm they will prepare and post complete and accurate prescription drug MRFs for the employer’s plans, when required. However, ultimately, these rules should benefit employers by improving existing price comparison tools, so employers can more effectively compare coverage options, make informed decisions about plan benefits, and fulfill their fiduciary obligations to prudently select plan service providers.

Similarly, the proposed service provider compensation disclosure regulations may prove very helpful to employers, particularly those who contract with PBMs. Given the recent wave of fiduciary breach lawsuits against group health plan sponsors, employer industry groups have asserted that the proposed rules should also address how plan fiduciaries can select and monitor service providers in a way that prevents unwarranted litigation or even provide some type of a “safe harbor” for fiduciaries to show they engaged in a prudent decision-making process. Thus, the anticipated guidance may prove very insightful for employers, especially if drafted to address fiduciary concerns extending beyond PBM compensation.

Parting Thoughts

Faced with rising healthcare and prescription drug costs, employers may question whether transparency laws will ever achieve their stated objective of lowering prices through greater competition. Of course, our healthcare system and markets are complex, and there are multiple forces that drive pricing; (the lack of) transparency is one factor. However, as explained above, many provisions of existing transparency laws, including the TiC rule and CAA 2021, have never been fully enforced or tested. Despite the recent government shutdown, the current administration remains intent on changing this trajectory. Hopefully, the new rules and regulations will help to remove barriers to true price transparency, while providing employers with the necessary information to fulfill their related fiduciary obligations.

NFP will monitor the rulemaking closely and provide updates in future editions of Compliance Corner, available at nfp.com. For further information on transparency obligations or fiduciary governance, please ask your broker or consultant for a copy of the NFP publications Transparency and CAA 2021 Obligations of Group Health Plans and ERISA Fiduciary Governance: A Guide for Employers.

On November 12, 2025, President Trump signed the Continuing Appropriations and Extensions Act of 2026, effectively ending the 43-day federal government shutdown. The stopgap bill temporarily extended funding for most of the federal government through January 30, 2026. Notably, though, the bill did not include any extension of the ACA enhanced premium tax credits (PTCs), which was the central issue during the shutdown. However, the parties tentatively agreed to vote on the outcome of the enhanced PTCs this month (i.e., in December).

As background, the PTC was originally established to help eligible individuals lower their premium payments for plans offered through ACA exchanges (marketplace). The PTC was originally available only to people who met specific criteria, including a modified adjusted gross income between 100% and 400% of the federal poverty line. Subsequent legislation “enhanced” PTC eligibility by eliminating the maximum income limit for eligibility, while also reducing the cost of monthly insurance premiums. The enhanced PTCs are currently set to expire at the end of 2025, absent a legislative extension.

Currently, the likelihood of a legislative compromise regarding the enhanced PTC is not clear. As explained in our prior article, Enhanced ACA Premium Tax Credits to Expire at End of Year, if the enhanced PTCs expire, premiums are expected to significantly increase. This increase may result in an overall decline in marketplace enrollment, a marked increase in the number of uninsured individuals, and a marketplace risk pool that includes more people with higher health needs.

Employer Takeaway

Despite the reopening of the federal government, the debate regarding the extension of the ACA enhanced PTCs remains unresolved. There have been a variety of proposals in the Senate, including to replace the enhanced PTCs with federal contributions to HSAs, which could be used for out-of-pocket expenses; however, it’s not clear exactly how such an arrangement would work or whether the proposals have sufficient support. Hopefully, the legislators will reach an agreement before the current government funding expires in late January.

The expiration of the enhanced PTC should not directly impact employers. If an applicable large employer (ALE) subject to the ACA employer mandate is offering all full-time employees affordable minimum value (MV) healthcare coverage, the employees would not be eligible for a PTC, and the employer would not risk penalties. Of course, if an ALE fails to offer affordable MV coverage to full-time employees, potential penalties can apply.

However, if the enhanced PTC subsidies expire, it’s possible some employers will experience an increase in enrollment of spouses or dependents of employees, to the extent eligible for the employer’s coverage. Additionally, if market premium costs are not more favorable, more qualified beneficiaries may also choose to elect or remain on COBRA. Finally, if the employer contracts with independent contractors, these individuals may also be seeking affordable coverage if they are no longer eligible for an enhanced PTC. However, for compliance reasons, it is generally not advisable for employers to expand group health plan eligibility to allow independent contractors to enroll; please see our related FAQ: Health Coverage for Independent Contractors? | NFP.

Accordingly, employers should remain aware of the status of the enhanced PTC, and related legislative developments, as 2026 approaches.

On November 3, 2025, the IRS released Notice 2025-61, which announces that the adjusted applicable dollar amount for calculation of PCOR fees for plan and policy years ending on or after October 1, 2025, and before October 1, 2026, is $3.84. This is a $0.37 increase from the $3.47 amount in effect for plan and policy years ending on or after October 1, 2024, and before October 1, 2025. 

PCOR fees are payable by insurers and sponsors of self-insured plans (including level-funded plans, HRAs, and many point solution programs). The fees apply to retiree-only plans but do not apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs.  

The fee is calculated by multiplying the applicable dollar amount for the plan or policy year by the average number of covered lives. The fee is reported and paid on IRS Form 720 and is generally due by July 31 of the calendar year following the close of the plan year. 

The PCOR fee requirement was originally enacted under the ACA, and later reinstated through the Further Consolidated Appropriations Act of 2020. The requirement will remain in place for plan/policy years ending before October 1, 2029. 

For further information, review IRS Notice 2025-61 and ask your broker or consultant for a copy of the NFP publication PCOR Fees: A Guide for Employers.

The IRS recently issued Revenue Procedure 2025-32, providing certain cost-of-living adjustments for a wide variety of tax-related items, including health FSA contribution limits, transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), the small business tax credit, and other adjustments for tax year 2026. Those changes are outlined below. 

• Health FSA: The annual limit on employee contributions to a health FSA will be $3,400 for plan years beginning in 2026 (up from $3,300 in 2025). In addition, the maximum carryover amount applicable for plans that permit the carryover of unused amounts is $680 (up from $660 in 2025). 
• Dependent Care Assistance Program (DCAP): While DCAP limits are not annually adjusted for inflation, effective January 1, 2026, the One Big Beautiful Bill Act (OBBBA) increases the maximum annual DCAP tax exclusion from $5,000 to $7,500 (single filers or married filing jointly), and from $2,500 to $3,750 (married filing separately). 
• Qualified Transportation Fringe Benefits: For 2026, the monthly amount that may be excluded from an employee's income for qualified parking increases to $340, as does the aggregate fringe benefit exclusion amount for transit passes (both up from $325 in 2024). The two limits are mutually exclusive. 
• QSEHRAs: For 2026, the maximum number of reimbursements under a QSEHRA may not exceed $6,450 for self-only coverage and $13,100 for family coverage (up from $6,350 and $12,800 in 2025). 
• Adoption Assistance Program: The maximum amount employees may exclude from their gross income under an employer-provided adoption assistance program for the adoption of a child will be $17,670 for 2026 (up from $17,280 in 2025). This exclusion begins to phase out for individuals with modified adjusted gross income greater than $265,080 and will be entirely phased out with a $305,080 modified adjusted gross income. 
• Small Business Healthcare Tax Credit: For 2026, the average annual wage level at which the credit phases out for small employers is $34,100 (up from $33,300 in 2025). 

Employers with limits that are changing – such as for health FSAs, transportation/commuter benefits, and adoption assistance – will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees. 

For further information, please ask your broker or consultant for a copy of the NFP publication Employee Benefits Annual Limits. 

Read the full announcement: IRS Revenue Procedure 2025-32. 

On October 16, 2025, the DOL, HHS, and Treasury (collectively, the departments) released new guidance in the form of FAQs regarding fertility benefit offerings. The guidance was issued in response to President Trump’s Executive Order 14216, "Expanding Access to In Vitro Fertilization," which called for recommendations to protect in vitro fertilization (IVF) access and reduce out-of-pocket and health plan costs for IVF treatment. Specifically, the FAQs clarify the types of “excepted benefits” employers can use to provide fertility benefits.  

Background  

As a reminder, excepted benefits are not required to comply with certain ACA mandates (e.g., coverage of preventive services without cost-sharing, prohibitions on annual limits for essential health benefits), or HIPAA portability requirements (e.g., special enrollment rights). There are several categories of excepted benefits, including independent, noncoordinated excepted benefits, and limited excepted benefits.  

Independent Noncoordinated Benefits  

Independent, noncoordinated excepted benefits include coverage for a specified disease or illness (e.g., cancer-only policies), and certain hospital indemnity or other fixed indemnity insurance. To qualify as independent noncoordinated excepted benefits, all the following conditions must be met: 

1. The benefits must be provided under a separate policy, certificate, or contract of insurance.  
2. There must be no coordination between the provision of such benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor. 
3. The benefits must be paid with respect to an event, regardless of whether benefits are provided for such event under any group health plan maintained by the same plan sponsor. 

The FAQs explain that an employer may offer fertility benefits to employees as an independent, noncoordinated excepted benefit (e.g., a specified disease or illness policy that covers infertility benefits) if the above conditions are met, and the employees would also not need to be enrolled in the employer’s traditional group health plan. Such benefits could not be self-insured (since the coverage must be provided under a separate policy, contract, or certificate of insurance). However, the coverage would not prevent an employee from contributing to an HSA (provided they were also covered by an HDHP and otherwise HSA-eligible).  

Limited Excepted Benefits  

Limited excepted benefits include limited-scope vision or dental benefits, health FSAs, certain employee assistance programs (EAPs), and certain HRAs, such as excepted benefit HRAs (EBHRAs).  

For an EBHRA to qualify as a limited excepted benefit, the following requirements must be met:  

1. Other traditional group health coverage (e.g., major medical coverage) must be made available to employees who are offered the EBHRA, although the EBHRA should not be an integral part of such plan. 
2. Amounts newly made available for each EBHRA plan year must not exceed the inflation-adjusted annual limit ($2,200 for plan years beginning in 2026). 
3. The EBHRA generally must not reimburse health coverage premiums. 
4. The EBHRA must be made available uniformly to all similarly situated individuals (regardless of any health factor), and required notice of such availability must be provided.  

The FAQs point out that an employer can offer an EBHRA that reimburses an employee's out-of-pocket costs for fertility benefits.  

Additionally, an employer can provide benefits for coaching and navigator services to help employees and their dependents understand their fertility options under an EAP that qualifies as a limited excepted benefit. However, the EAP would not be a limited excepted benefit if it offered any fertility benefits that are significant benefits for medical care. (Among other requirements, for an EAP to qualify as an excepted benefit, it must not provide “significant” medical care benefits, considering the amount, scope, and duration of covered services.)  

Employer Takeaway 

Employers who offer fertility benefits (or are considering doing so) should be aware of the new guidance, which represents initial steps by regulators to respond to the Trump administration’s executive order to make such benefits more broadly accessible.  

The option to purchase insured coverage that provides only infertility benefits, which can be made available to all employees, may appeal to some employers who are currently providing these benefits on a self-insured basis through a fertility vendor and traditional HRA, which can only be made available to those enrolled in a traditional group health plan. Of course, the infertility policy options will depend on the carrier offerings, and the guidance did not directly address the cost aspects.  

EBHRAs may be an alternative for employers seeking to provide a more limited benefit to assist employees with out-of-pocket infertility costs; however, such employees would also need to be offered traditional group coverage.  

The departments indicated they intend to propose rules to provide additional ways that certain fertility benefits may be offered as limited excepted benefits. They are also considering changes to the standards under which supplemental coverage, including supplemental infertility coverage, can be provided as an excepted benefit by a group health plan. Accordingly, employers should stay tuned for further guidance, as we will report relevant updates in Compliance Corner. 

Read the departments’ guidance on the legislation here: DOL FAQs about Affordable Care Act Implementation Part 72.

The Affordable Care Act (ACA) enhanced premium tax credits (PTCs) are set to expire at the end of 2025, absent additional congressional action. Employers may question whether the expiration will impact their group health plans.  

Background  

Initially enacted in 2014, the PTC was established to help eligible individuals lower their premium payments for plans offered through the health insurance exchanges (marketplace) created under the ACA. The ACA marketplace determines how much enrollees pay for their health insurance premiums at a certain percent of their income, with the federal government covering the remainder in the form of a tax credit. Specifically, the PTC is calculated as the difference between a benchmark premium (the premium for the second-lowest-cost silver plan available in a region) and a maximum contribution per household, calculated as a percentage of household income and adjusted over time. 

Originally, the PTC was available to people who met specific criteria, including a modified adjusted gross income between 100% and 400% of the federal poverty line (FPL). Eligibility for the PTC was subsequently expanded by the American Rescue Plan Act (ARPA) of 2021, which was later extended by the 2022 Budget Reconciliation Law. Specifically, the “enhanced” PTC established under ARPA eliminated the maximum income limit (400% of the FPL) for PTC eligibility purposes, while also reducing the cost of monthly insurance premiums. These changes were extended through tax year 2025, with a sunset date of January 1, 2026. However, and importantly, employees are not eligible for the PTC if they receive an offer of affordable, minimum value group health plan coverage from their employer.  

Anticipated Impact of Expiration of Enhanced PTCs 

The expiration of the enhanced PTC under ARPA is expected to result in an increase in gross benchmark premiums over the next several years, with the Congressional Budget Office (CBO) estimating a 7.9% increase in premiums every year through 2034. This may result in an increase in individuals leaving the marketplace, and a potential increase in premiums for the remaining enrollees, as the marketplace risk pool may include more people with higher health needs. The CBO has also estimated that the enhanced PTC expiration will result in an annual increase of 3.8 million uninsured individuals over the next eight years.  

Employer Takeaway  

The expiration of the enhanced premium tax subsidies does not have a direct impact on employer-sponsored group health plans. Applicable large employers (ALEs) will still be subject to the ACA employer mandate and potential penalties if they fail to offer affordable minimum value coverage to full-time employees. However, for some employers who fail to offer affordable coverage, the likelihood of a penalty may slightly decrease depending on their employees’ household income, since fewer employees may be eligible for a PTC. 

Additionally, the higher marketplace premiums could also result in more individuals seeking to maintain coverage under an employer-sponsored plan. For example, some employees (and dependents) who experience a COBRA qualifying event may choose to elect COBRA coverage with the employer (despite the premium cost) when presented with the alternative of higher premiums for marketplace coverage.  

As Congress continues to debate the outcome of the enhanced PTC, and the ensuing government shutdown, employers should be aware of the developments and their possible impact.  

Read the Congressional FAQs here: Enhanced Premium Tax Credit Expiration: Frequently Asked Questions.

As October is Breast Cancer Awareness Month, employers that sponsor group health plans should be aware of the expanded breast cancer screening benefits that are scheduled to take effect in 2026.

Background

The ACA requires non-grandfathered group health plans (whether fully insured or self-insured) to cover certain preventive care in-network without cost-sharing (including deductibles, copayments, or coinsurance). The required covered care includes services given an “A” or “B” rating from the U.S. Preventive Services Task Force (USPSTF), vaccines recommended by the Advisory Committee on Immunization Practices (ACIP), and preventive care and screenings for children and women recommended by the Health Resources and Services Administration (HRSA).

If there are changes in recommendations or guidelines, plans generally must provide coverage for plan years that begin one year after the change. For example, a change recommended in December 2024 would take effect in plan years beginning in 2026. Specific information about recommendations and guidelines is available on the healthcare.gov website: preventive health services | healthcare.gov. The agencies have indicated this site will be updated to reflect the date of adoption of a recommendation so sponsors and insurers will know when coverage is required.

2026 Changes

Updated HRSA Women's Preventive Services Guidelines will broaden the range of breast cancer screening benefits that are covered as preventive care. Currently, ACA guidelines require group health plans to cover routine screening mammograms for women at average risk of breast cancer starting at age 40, at least biennially and as frequently as annually. Effective for plan years beginning in 2026, the coverage must also include additional imaging services (e.g., ultrasounds or MRIs) when medically indicated, and pathology services (e.g., a needle biopsy), if necessary to complete the screening process for malignancies or address findings on the initial mammography.

Furthermore, new HRSA guidance requires coverage (without cost-sharing) of patient navigation services for breast and cervical cancer screening and follow-up to increase use of screening recommendations based on the patient's need for such services. Navigation services would include patient assessment and care planning, referrals to supportive resources (e.g., transportation, language translation, and social services), patient education and coaching, as well as healthcare access and system navigation. These services should be individualized to the patient and can be provided in person and/or virtually. According to the HRSA, navigation services have proven to lead to earlier cancer detection, improved screening rates, and treatment outcomes.

The 2026 HRSA updates are in addition to existing USPSTF-recommended preventive services, which include breast cancer susceptibility gene (BRCA) screening, genetic counseling, and testing, if appropriate for a woman as determined by her healthcare provider (e.g., based on a prior breast cancer diagnosis or family history associated with an increased risk of BRCA-related cancer). The USPSTF guidelines also include coverage of risk-reducing prescription medications (e.g., tamoxifen) for certain women at increased risk for breast cancer, when prescribed by clinicians.

Employer Takeaway

Employers should be aware of the upcoming expanded breast cancer screening and coverage changes in 2026 and consult with their carriers, TPAs, and other service providers regarding necessary updates to plan systems, documents, and participant communications to implement these requirements. Employers may also want to inquire regarding any potential budgetary impact resulting from the expanded coverage recommendations.

Additionally, employers should monitor for further updates to preventive services guidelines generally, since there have been recent staffing changes at the agencies that make the recommendations and pending litigation challenging aspects of the ACA preventive services mandate. We will report relevant developments in Compliance Corner.

Read the full expansion of changes here: Update to the Health Resources and Services Administration-Supported Women's Preventive Services Guidelines

On August 25, 2025, a U.S. District Court denied a motion to dismiss a class action lawsuit against Kaiser Foundation Health Plan Inc. (KFHP) for its denial of coverage for prescription hearing aids, in violation of Section 1557 of the ACA. Specifically, the court found the plaintiff had standing to bring the lawsuit and adequately alleged that the plan's coverage exclusion was discrimination under the ACA.

Background

The plaintiff in the case was an enrollee in a health plan administered by Kaiser Foundation Health Plan of Washington Inc. (KFHPWA) and suffers from bilateral sensorineural hearing loss. The plaintiff has worn prescription hearing aids since childhood in order to work and effectively conduct daily activities. After enrolling in the KFHPWA plan, the plaintiff saw an audiologist who recommended a new type of prescription hearing aid that was not covered under the plan. The plaintiff subsequently brought a single claim on behalf of himself and a putative class alleging that the defendant's exclusion of hearing aid exams and prescription hearing aids violates Section 1557 of the ACA, because it discriminates against plan members on the basis of disability.

The Court's Analysis

The defendant issued a motion to dismiss the claim, arguing that the plaintiff lacked standing under Article III of the U.S. Constitution to bring the lawsuit. Article III standing requires that a plaintiff must have suffered an injury in fact that is fairly traceable to the challenged conduct of the defendant. Here, the defendant argued that the plaintiff's alleged injuries were not fairly traceable to KFHP because the plan was issued by its subsidiary, KFHPWA. However, the court held the plaintiff had established that the alleged harms suffered by himself and the class were fairly traceable to KFHP's plans, including those administered by KFHPWA, which all deny coverage related to prescription hearing aids.

The defendant also moved to dismiss the plaintiff's claim under Section 1557 of the ACA, which prohibits discrimination in health programs and activities based on race, color, national origin, sex, age, or disability, for certain covered entities that receive federal financial assistance. First, the court determined the defendant was a “covered entity” because KFHP (the parent company) engaged in health programs or activities that received federal financial assistance.

Next and notably, the court found that the plaintiff had satisfactorily pled that the hearing aid exclusion is a sufficiently close fit to intentional discrimination on the basis of disability. Specifically, the complaint alleged that the prescribed hearing aids are the precise coverage often needed by disabled people with hearing loss that cannot be treated by the bone-anchored hearing aids and cochlear implants covered under the plan.

The court also rejected the defendant's argument that the plaintiff's discrimination claim fails because the plan does not deny hearing disabled enrollees meaningful access to the facets of the plan enjoyed by other enrollees. Rather, the court found the plaintiff had adequately alleged that the proposed class members had no "meaningful access" to the same plan benefits (e.g., outpatient visits and durable medical equipment) as made available to other enrollees who needed the same to treat their own respective diagnosed health conditions. The court concluded the plaintiff sufficiently pled that the discriminatory design and administration of the plan had a disparate impact on hearing-disabled enrollees.

Employer Takeaway

While the case here is still in its very early stages, and the court has not issued a final judgment on the merits of the Section 1557 discrimination claim, the case nonetheless highlights the potential liability risks involved with coverage exclusions under the ACA. Employers should remain aware of these developments and should carefully evaluate any coverage exclusions for prescription hearing aids. We will continue to monitor this case and related legal developments and provide additional updates moving forward.

Read the full case here: Delessert v. Kaiser (Order on Motion to Dismiss)

On September 9, 2025, the Eleventh Circuit Court of Appeals held in Lange v. Houston County that a plan that did not cover gender affirming surgery did not violate Title VII of the Civil Rights Act of 1964 (Title VII).

Background

The plaintiff in the case worked for the defendant as a deputy sheriff. They are transgender and sought gender affirming surgery (as well as the drugs, services, and supplies that went along with it). However, the defendant's plan did not cover those products or services.

The plaintiff filed suit alleging that the plan violated Title VII because it discriminated based on sex. Title VII makes it unlawful for a covered employer to “discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin.” Since health coverage is a privilege of employment, a health plan cannot discriminate based on sex.

The district court ruled in favor of the plaintiff and issued a permanent injunction prohibiting the defendant's plan from excluding sex change surgery from coverage. When the Eleventh Circuit took the case initially, a three-member panel of the appellate court affirmed the district court. However, the appellate court decided to revisit the case en banc (which means all the judges would consider the case, not just a three-member panel). As a result, the Eleventh Circuit reversed its initial ruling, lifted the injunction, and remanded the case back to the district court for further proceedings.

The Court's Analysis

The plaintiff cited the Supreme Court's 2020 decision in Bostock v. Clayton County in support of their contention that the policy exclusion discriminates based on sex. The Bostock case applied a test to determine whether such discrimination exists: change one thing at a time and see if the outcome changes. The plaintiff argued that the exclusion would not have applied if one thing had been different: if they had been female, then the exclusion would not have applied. The district court and the three-member panel of the Eleventh Circuit agreed with the plaintiff's application of this test and ruled in favor of the plaintiff.

However, the new en banc decision relied upon a more recent Supreme Court decision. In 2024, the Court ruled in United States v. Skrmetti that a law did not violate the Equal Protection Clause of the 14th Amendment when it prohibited the use of certain treatments for gender dysphoria but did not prohibit the use of those same treatments for other conditions. The Court reasoned that a law that does not prohibit conduct for one sex that it permits for the other does not discriminate based on sex. If a male participant was denied those treatments to treat gender dysphoria, that same male participant would not be denied those treatments for other conditions.

Although the Court's decision dealt with violations of the 14th Amendment, the Eleventh Circuit applied that reasoning here. The defendant's policy excluded coverage for these treatments from everyone, not just male participants seeking gender affirming care. The Eleventh Circuit reasoned that since the exclusion applied to everyone, regardless of sex, it did not discriminate based on sex.

Employer Takeaway

This case is just the most recent example of the fluid legal status of gender-related treatments, products, and services. Although the Eleventh Circuit issued its ruling based on the application of a recent Supreme Court decision, there is no guarantee that other appellate courts will look at this the same way. Due to the legal uncertainty involved, employers should consult with their lawyer if they wish to make changes to their health plans involving gender-related treatments, products, and services.

Read the full case: Lange v. Houston County (USCourts.gov)

On September 2, 2025, a U.S. District Court in Illinois dismissed an ERISA preemption lawsuit by Central States, Southeast, and Southwest Areas Health and Welfare Fund against the Arkansas Insurance Commissioner and Department. Specifically, the plaintiff (a self-funded, multiple employer welfare plan) challenged an Arkansas state rule that permits the Arkansas Insurance Commissioner (the commissioner) to review the adequacy of pharmacy reimbursement payments made by health plan PBMs, arguing that the rule's reporting and dispensing fee requirements were preempted by ERISA.

The court ultimately held that the plaintiff failed to sufficiently allege that the rule referred to, or had an impermissible connection with, ERISA plans and dismissed the case.

At issue in the case was a rule issued by the commissioner (Rule 128) in response to the Arkansas Pharmacy Benefits Manager Licensure Act (PBMLA). The rule allowed the commissioner to impose a dispensing fee (payable to pharmacies) if pharmacy compensation is not deemed “fair and reasonable” and also included a reporting provision that required health plans to submit to the commissioner certain pharmacy compensation information. The plaintiff argued that ERISA expressly preempts any state law that may relate to an employee benefit plan (29 U.S.C. § 1144(a)). Specifically, a law “relates to” an employee benefit plan if it has a connection with or reference to the plan. The plaintiff also argued that the rule's reporting and dispensing fee requirements had a reference to ERISA plans because the rule imposes obligations directly on plans (as opposed to merely regulating PBMs). However, in its ruling, the court noted that benefit plans subject to the rule did not necessarily need to be ERISA plans and held the plaintiffs failed to allege that the rule acted exclusively on ERISA plans or that the existence of an ERISA plan was essential to the rule's operation.

In addition, the court held that the rule’s dispensing fee requirement was not ERISA-preempted because it was essentially a cost regulation that did not impose substantive requirements for ERISA plans and noted that the rule may (but does not automatically) impose an additional fee on plans. The court also dismissed the preemption claim against the rule’s reporting requirement, citing a Sixth Circuit Court of Appeals decision in Self-Ins. Inst. of Am., Inc. v. Snyder, 827 F.3d 549, 558 (Sixth Cir. 2016), which held that ERISA does not preempt state laws that impose incidental reporting obligations on ERISA plans.

Employer Takeaway

While the court’s dismissal of the preemption claim may be viewed as a validation of state laws that regulate PBMs, there has been a growing number of cases involving challenges to state PBM laws under ERISA. As noted in our previous Compliance Corner article, nearly every state has implemented laws that seek to impose wide‑ranging reforms on PBMs and regulate PBM business practices. Nonetheless, courts have remained largely split regarding the applicability of state PBM laws to self-funded plans, and whether the ERISA preemption doctrine applies. As a result, employers should not rely on the assumption that a self-funded plan is automatically exempt from state PBM regulations or reporting obligations. Employers should continue to monitor legal developments in this area and carefully evaluate the scope and applicability of state PBM laws for prescription drug plans.

Read the full case: Cent. States, Se. & Sw. Areas Health & Welfare Fund v. McClain, (N.D. Ill. Sept. 2, 2025)