This state law update highlights key legal and regulatory developments affecting employee benefits and healthcare access.
During the first quarter of the year, regulators and enforcement authorities continued to shape the benefits landscape primarily through ongoing litigation and targeted regulatory actions rather than new, sweeping legislation. While relatively few entirely new laws took effect in Q1, federal policy activity and state court decisions underscored the ongoing variability of benefit-related requirements nationwide.
Executive Summary Abortion and reproductive care: Policy developments were driven less by new legislation and more by litigation, enforcement actions and post-election implementation disputes, particularly centered on medication abortion, telehealth access and state constitutional amendments. Gender-affirming care: Heightened federal and state legal activity was marked by paused federal enforcement, continued litigation over existing state restrictions, and increased pressure on providers to comply with competing state and federal pressures. Other benefit-related updates: First-quarter developments included changes to individual mandate penalties for calendar year 2025, updates to local health care expenditure requirements, including California’s Health Care Security Ordinance (HCSO) and Healthy Airport Ordinance (HAO), and continued activity affecting state assessment programs such as New York’s Health Care Reform Act (HCRA). Note: Self-funded ERISA plans are generally not impacted by state insurance laws. Therefore, no immediate action is required from employers on the information discussed below. We nevertheless recommend that employers review current benefits in conjunction with state mandates to ensure that plan offerings keep pace with market changes, and continue to meet enrollee needs and expectations. |
ABORTION AND REPRODUCTIVE CARE
Ongoing pressure to limit mifepristone distribution pathways
Late last year, the U.S. Food and Drug Administration (FDA) announced that it planned to delay releasing the findings of a new safety review of the abortion medication mifepristone until after the November 2026 midterm elections. In a January oversight hearing before the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee, Republican leadership pressed the FDA to complete its review and restore prior in-person dispensing requirements. The hearing focused on congressional concerns about the timing and scope of the FDA’s review process, including dissatisfaction with the pace and transparency of the review and discussion of potential legislative approaches if the agency does not act quickly. The FDA did not present testimony, release new data or publish any findings during or following the hearing, and no formal changes to FDA policy have resulted to date.
Separately, the U.S. Department of Justice (DOJ) has asked courts to pause or dismiss several state-led challenges to federal policies expanding access to mifepristone, citing the FDA’s ongoing safety review of the drug. DOJ filings emphasize that FDA drug safety determinations fall within the agency’s scientific and regulatory authority, and that parallel court proceedings could prematurely constrain or predetermine the outcome of that review. Courts have not yet issued any rulings on these requests, and the FDA has not released its final review or announced a definitive timeline.
In a related federal development, Senator Josh Hawley (R-MO) introduced federal legislation in March that, if passed, would revoke the FDA’s approval of mifepristone. The proposal, titled the Safeguarding Women from Chemical Abortion Act, would effectively ban the drug nationwide. While the bill’s prospects in Congress remain uncertain, its introduction signals an effort to reframe medication abortion access as a matter for Congressional action rather than agency regulation, reinforcing the parallel challenges to the FDA’s authority currently playing out in the court system.
LOCKTON COMMENT: While no immediate regulatory changes have occurred, the outcome of the FDA review (or related legislative or litigation activity) could intersect with states’ regulation of abortion by limiting access to the medication through telehealth, mail or retail pharmacy channels. Employers should continue monitoring developments that could affect access pathways and employee experience across states.
State ballot activity and post-election litigation
As we have seen in past years, states continue to use ballot initiatives and constitutional amendments as a primary mechanism for shaping abortion policy, with the 2026 election cycle already emerging as a focal point for reproductive rights measures. In Virginia, lawmakers advanced a constitutional amendment that would enshrine reproductive freedom in the state constitution, clearing the legislature in January and positioning the measure for voter consideration on the November 2026 ballot. Nevada has also confirmed a constitutional amendment for the November 2026 ballot that would protect a right to abortion, and several states, including Idaho, Oregon and Montana, are pursuing potential ballot initiatives related to abortion or reproductive care access.
At the same time, states that adopted abortion-related ballot amendments in 2024 are still embroiled in litigation over how those amendments will be implemented in practice. In a February ruling addressing such a dispute, an Arizona state court permanently blocked multiple pre-existing abortion restrictions, including limits on telemedicine and medication abortion, finding that they conflicted with the voter-approved 2024 amendment protecting abortion access. As a result, abortion access in Arizona has materially expanded, with medication abortion, including through telehealth and mail delivery, now permitted.
Missouri is similarly navigating post-election litigation following its 2024 voter-approved reproductive rights amendment. In January, a multi-week trial concluded that addressed targeted provider regulations, waiting periods and procedural requirements that providers argue function as a de facto ban despite the amendment. While some restrictions have been temporarily blocked, access remains limited as other regulations remain in place pending a final ruling, which is expected later in 2026.
LOCKTON COMMENT: State ballot initiatives and related litigation remain a key driver of abortion access variability across the country. Even where voters have approved constitutional protections, implementation often unfolds through extended court proceedings, resulting in uneven and evolving access across states. Employers with multi-state workforces should continue monitoring ballot developments and post-election litigation that may affect employee access to care and related benefits considerations.
State enforcement actions and interstate shield law conflict
Texas continues to pursue an aggressive extraterritorial enforcement posture aimed at restricting abortion access, including through state-initiated litigation and private civil enforcement mechanisms designed to reach beyond its borders. In early 2026, Texas Attorney General Ken Paxton filed multiple lawsuits against out-of-state providers and organizations alleged to have prescribed or mailed abortion medication to Texas residents, seeking court orders to halt the distribution of abortion pills into the state and to prevent providers from practicing medicine in Texas without a license. These actions reflect Texas’s ongoing efforts to limit access to medication abortion through telehealth and mail-order channels, even where care is provided from jurisdictions in which abortion is legal.
In parallel, Texas’s recently enacted House Bill 7 (HB 7) is being actively tested in court through private civil lawsuits. HB 7 authorizes private citizens to bring civil actions against individuals or entities alleged to have manufactured, prescribed, mailed or otherwise provided abortion-inducing medication into Texas, with statutory damages of at least $100,000 per violation. In February, the first known lawsuit under HB 7 was filed against an out-of-state physician, marking an initial test of the law’s scope and its attempt to counteract protective “shield laws” enacted in other states. While litigation is still in early stages, the case highlights the expanding role of private enforcement as a tool to restrict abortion access in Texas.
Texas courts are still evaluating challenges to earlier private-enforcement abortion laws. In January, a Texas appeals court allowed Planned Parenthood affiliates to proceed with a lawsuit challenging the Texas Heartbeat Act’s private enforcement structure, which relies on lawsuits brought by private citizens instead of government agencies. The court found that providers face a credible and ongoing threat of litigation even absent direct enforcement actions. This case invites judicial scrutiny of Texas’s reliance on private civil enforcement models and may inform how courts assess standing and constitutional challenges in future cases.
LOCKTON COMMENT: Texas’s state enforcement actions are unfolding against a broader backdrop of interstate legal conflict, as multiple states have enacted or expanded shield laws intended to protect providers and patients involved in legally permitted reproductive care from out-of-state investigations or liability. States have recently strengthened shield laws to address telehealth, cross-border care and health data privacy. However the effectiveness of these protections remains largely untested in the face of direct enforcement actions like those pursued by Texas. As a result, these trends increase uncertainty around provider participation, telehealth availability and medication access across state lines.
Additional state-level litigation and legislative developments
In ongoing litigation challenging Idaho’s near-total abortion ban, a federal judge allowed a case to move forward that argues abortion may still be constitutionally protected when necessary to prevent serious and lasting harm to a pregnant person’s health. Rather than framing the issue as a general right to abortion, the court emphasized principles of self-preservation and necessity, noting that Idaho’s statutory structure criminalizes abortion except to prevent death and lacks an exception for serious health harms short of death. The case is still in early proceedings and future rulings will determine its durability, but the decision to allow the case to move forward illustrates how post-Dobbs abortion disputes are increasingly litigated through narrow constitutional theories (e.g., self-defense and medical necessity) that can still materially affect access within a state.
In early March, an Indiana trial court granted a permanent injunction preventing the state from enforcing the state’s near-total abortion ban against residents whose sincerely held religious beliefs conflict with the law. The court found that the ban imposed a substantial burden on religious exercise protected under Indiana’s Religious Freedom Restoration Act (RFRA) and that the ban was not the least restrictive means of advancing a compelling state interest. Notably, this case reflects a less common application of religious freedom laws, using a state RFRA to protect individual access to abortion care based on sincerely held religious beliefs, rather than to exempt employers or providers from offering or covering services. Because the case proceeds as a class action, the ruling extends beyond the named plaintiffs to additional Indiana residents who meet the class criteria, though public reporting indicates that the state has already appealed the ruling.
In January, the Wyoming Supreme Court struck down two 2023 abortion laws, including a near-total abortion ban and the nation’s first explicit ban on medication abortion, holding that they violated the Wyoming Constitution’s guarantee that each competent adult has the right to make their own healthcare decisions. The court relied on a voter-approved 2012 constitutional amendment, originally enacted in response to the Affordable Care Act, and concluded that abortion constitutes a form of healthcare protected by that provision. Applying strict scrutiny, the court found the state failed to show that the bans were narrowly tailored to serve a compelling interest, while noting that the legislature could pursue more limited regulation or seek a constitutional amendment.
Following that ruling, Wyoming lawmakers enacted a new statutory restriction by passing a “fetal heartbeat” law. In March 2026, the governor signed legislation banning abortions once embryonic cardiac activity can be detected (commonly described as around six weeks’ gestation), with a narrow exception tied to medical emergencies affecting the life or health of the pregnant person and no exceptions for rape or incest. In signing the law, the governor publicly acknowledged that the measure is likely to be challenged in court, particularly in light of the Wyoming Supreme Court’s recent decisions striking down broader abortion bans under the state constitution. Wyoming’s sole abortion provider has indicated it is prepared to pursue litigation.
LOCKTON COMMENT: For employers, these developments reinforce the continued instability of abortion access rules, where new statutory restrictions may take effect (or, conversely, be blocked or overturned) rapidly, requiring ongoing monitoring and flexibility as access conditions change across jurisdictions.
GENDER-AFFIRMING CARE
Federal developments
At the federal level, early 2026 has been marked by significant litigation and regulatory volatility affecting access to gender-affirming care, particularly for minors. In December 2025, the U.S. Department of Health and Human Services (HHS) issued a declaration stating that certain forms of gender-affirming care for children and adolescents do not meet professional recognized standards of care and warning that providers could face exclusion from federal healthcare programs. A coalition of states promptly challenged the declaration in federal court, and in January 2026, HHS agreed to temporarily suspend the issuance of exclusion notices while the litigation proceeds, effectively pausing enforcement while the case continues.
Related proposed federal rules that could restrict coverage of gender-affirming care for youth through Medicaid, Medicare and other federal programs have likewise been delayed, with HHS agreeing not to formally communicate or implement the proposed restrictions while courts consider motions to block them. The administration in February also announced an expanded version of the “Mexico City Policy,” a long-standing foreign assistance policy (sometimes referred to as the “global gag rule”) that, when in effect, conditions eligibility for U.S. foreign aid on an organization’s agreement not to provide or promote certain services. Historically focused on abortion-related activities, the latest expansion extends those restrictions to include activities associated with “gender ideology” and DEI initiatives, broadening the policy’s impact across a wider range of U.S.-funded global health and humanitarian programs.
Even while federal proposals remain unresolved, several more health systems have paused or scaled back pediatric gender-affirming care in response to heightened federal enforcement activity, including DOJ investigations, HHS referrals and administrative executive actions tied to federal funding, as creating unacceptable regulatory and financial risk. In Wisconsin, both Children’s Wisconsin and UW Health stopped prescribing puberty blockers and hormone therapy for patients under 18, while in Colorado, Children’s Hospital Colorado and Denver Health paused gender-affirming care for minors after HHS referred the hospital for investigation, raising concerns about possible exclusion from federal healthcare programs. Families of affected patients subsequently filed lawsuits against Children’s Hospital Colorado, alleging that the hospital’s decision unlawfully discriminates against transgender patients under state law and abruptly cut off medically necessary care.
In California, Rady Children’s Health announced that it would end gender-affirming care for patients under 19, also citing escalating federal scrutiny and investigation risk. California’s attorney general sued Rady, arguing that its decision violated legally binding conditions from the hospital’s prior merger approval, which required the continued provision of those services. A state court judge later ordered Rady to continue providing gender-affirming care (excluding surgeries) while the case proceeds, finding that the hospital faced competing federal and state pressures but that an immediate funding cutoff was not yet imminent. New York has likewise seen direct state intervention. After NYU Langone ended its transgender youth health program, the New York Attorney General demanded that the hospital resume providing gender-affirming care to patients under 19, asserting that discontinuing care based on gender identity may violate state anti-discrimination law even in light of federal policy ambiguity.
In a separate line of federal activity, courts have continued to limit federal efforts to obtain sensitive patient information related to youth gender-affirming care. In California, the DOJ withdrew a subpoena seeking identifying medical records of more than 3,000 transgender minors treated at Children’s Hospital Los Angeles after families sued to block the request. Under the resulting settlement, the hospital is permitted to withhold or redact patient-identifying information, reinforcing existing medical privacy protections and curbing the scope of federal data demands in this area.
Finally, in January 2026, the FDA revised guidance on studying sex difference in clinical research, removing prior references to gender identity and related concepts and instead emphasizing biological sex. While not specific to gender-affirming care, the revision reflects the administration’s continued focus on making broader federal policy shifts that may influence how future medical research and regulatory standards are framed.
LOCKTON COMMENT: Despite the volume of federal activity, there has been no immediate change to employer group health plan obligations related to gender-affirming care coverage. The most significant federal actions remain tied to provider participation in federal programs and public plan funding rather than directly regulating private employer-sponsored plans. However, the downstream effects of provider-level uncertainty are becoming increasingly visible, particularly in states where hospitals have paused services despite the absence of state-level prohibitions. We expect continued litigation to be the primary driver of change this year, with courts determining whether federal agencies may condition funding or participation on restrictions affecting gender-affirming care. State enforcement activity, especially in states with nondiscrimination laws or contractual obligations tied to hospital operations (as in the California Rady case), is likely to increase and further widen the gap between federal policy direction and state-level requirements.
Developments in litigation and legislation
Reporting throughout the year’s first quarter confirms that the broader state landscape governing minors’ access to gender-affirming care remains largely unchanged, with most restrictions stemming from laws enacted in prior years that continue to be litigated.
One notable state update occurred in Missouri, where the Missouri Supreme Court unanimously upheld the state’s law restricting access to gender-affirming medical care for minors and prohibiting Medicaid coverage of such care for all ages. In its January 2025 decision, the court rejected constitutional challenges brought by families and providers, concluding that the law permissibly regulates medical treatment based on age and medical use, and does not violate parental rights or state equal-protection guarantees. As a result, Missouri’s restrictions remain fully enforceable, reinforcing the durability of similar youth care bans following recent U.S. Supreme Court precedent, including last year’s Skrmetti decision.
In contrast to the lawsuit compelling the DOJ’s withdrawal of its request for patient medical records in California, the Texas Supreme Court in March 2026 ruled that the Texas state attorney general could compel the LGBTQ+ advocacy organization PFLAG to produce records as part of an investigation related to the state ban on gender-affirming care for minors. The court held that the attorney general need only demonstrate a reasonable belief that the organization may possess relevant information and reversed a lower court decision that had blocked the initial demand. While the ruling does not expand the scope of Texas’s underlying care restrictions, it affirms the state’s broad investigatory authority and highlights divergent approaches states are taking with respect to enforcement and access to sensitive information.
Additionally, the U.S. Court of Appeals for the Fourth Circuit in March upheld a West Virginia law barring Medicaid coverage for certain gender-affirming medical procedures for adults, marking the first time a federal appellate court has permitted restrictions on adult gender-affirming care to take effect. The court concluded that the law regulates specific medical procedures rather than individuals and therefore does not constitute unlawful discrimination, relying in part on the U.S. Supreme Court’s 2025 Skrmetti decision involving care for minors. The ruling reinstated the state’s Medicaid exclusion after a prior injunction had blocked enforcement.
Although state-level changes were limited this quarter, state legislatures across the country have been active as 2026 legislative sessions are well underway. Hundreds of bills have been introduced addressing transgender health care, reproductive rights and related issues, many of which seek to expand or entrench existing restrictions rather than create new protections. To date, however, most of this legislative activity has not resulted in enacted laws, with Q1 developments mainly reflecting reintroduced proposals, incremental modifications or measures that have stalled in committee.
LOCKTON COMMENT: From a compliance perspective, Q1 state-level activity has not materially shifted the legal baseline for employer-sponsored plans in most jurisdictions, even as litigation continues to test existing frameworks. However, the Fourth Circuit’s decision extending Skrmetti-based reasoning to adult care restrictions is a notable development in the legal landscape and may affect how states defend Medicaid exclusions and other coverage limitations. Employers should continue to monitor litigation outcomes and enforcement posture, particularly where plan design or funding intersects with state Medicaid programs or state-regulated insurance.
OTHER BENEFIT-RELATED UPDATES
California
Pursuant to its individual health insurance mandate requirements, California released its calendar year (CY) 2025 flat-dollar amount monthly penalties for residents who fail to maintain minimum essential coverage (MEC) as defined under the Affordable Care Act (ACA). Flat amount penalties for CY 2025 increased to $950 per adult and $475 per child, up from $900 per adult and $450 per child in 2024.
California (San Francisco)
California’s San Francisco Health Care Security Ordinance (HCSO) healthcare expenditure rates increased for 2026, raising the minimum hourly amount that covered employers must spend on health care benefits for employees performing work in San Francisco. Effective Jan. 1, 2026, for large employers (100 or more employees worldwide), the minimum hourly expenditure rate increased from $3.85 per hour in 2025 to $4.11 per hour in 2026. For medium-sized employers (20-99 employees worldwide), the required rate increased from $2.56 per hour in 2025 to $2.74 per hour in 2026. Employers with fewer than 20 employees worldwide remain exempt. The wage threshold for exempt managers, supervisors or confidential employees has also increased from $125,405 annually (or at least $60.29 per hour) in 2025 up to $128,861 annually (or at least $61.95 per hour) in 2026.
LOCKTON COMMENT: Employers with employees performing work in San Francisco should evaluate whether their current healthcare expenditures meet the higher 2026 thresholds and assess potential “top off” payment needs, particularly for self-insured plans, ahead of the annual HCSO reporting deadline in April.
California (San Francisco)
Also impacting employers with San Francisco employees, California has amended its Healthy Airport Ordinance (HAO) to introduce a new compliance option for employers with covered employees working at San Francisco International Airport (SFO). Effective Feb. 26, 2026, Quality Standards Program (QSP) employers may choose among three compliance methods for the remainder of 2026, including a newly established tiered irrevocable healthcare expenditure option. During this transition period (Feb. 26 through Dec. 31, 2026), employers may continue using one of the two existing compliance methods or elect to adopt the new tiered approach. Beginning Jan. 1, 2027, however, the tiered irrevocable healthcare expenditure method will become the sole compliance option under the ordinance. The phased implementation is intended to give covered employers time to evaluate their current approach and prepare for the mandatory transition in 2027.
LOCKTON COMMENT: Employers with covered employees at SFO should use the 2026 transition period to review their current HAO compliance method and model the financial and administrative impact of the new tiered irrevocable healthcare expenditure approach. All impacted employers, including those that elect to remain on an existing compliance method for the remainder of 2026, should begin planning for the required 2027 transition, including confirming eligibility of covered employees, aligning payroll and benefits administration processes, and coordinating with vendors to support the new expenditure structure.
New York
New York’s Department of Health has released the 2026 covered-lives assessment (CLA) rates and graduate (GME) percentage surcharges under the state’s Health Care Reform Act (HCRA). The HCRA imposes an annual CLA on “electing” health claim payors, including self-funded plans, based on the number of covered individuals residing in New York, with rates varying by region. For 2026, New York City continues to carry the highest CLA at $180.46 per individual with self-only coverage and $559.44 per individual with family coverage, while the lowest rates apply in the Utica/Watertown region. Several regions experienced modest rate increases or decreases compared to prior years. Payors that do not elect into the CLA program remain subject to regional GME percentage surcharges on certain New York hospital expenses, which range up to 27.28% for New York City hospitals in 2026, in addition to the indigent care surcharge that continues to apply through the end of 2026. These surcharges may apply even when an employer has no New York-resident employees, if covered individuals receive care at HCRA-designated facilities in the state.
LOCKTON COMMENT: Employers with self-funded plans or national provider networks should reassess their HCRA election status in light of the 2026 rates, particularly if covered individuals live in New York or may receive care at New York hospitals. Electing into the covered-lives assessment program may help some plan sponsors reduce exposure to uncapped GME and indigent care surcharges. Employers should also confirm filing cadence (annual vs. monthly) and ensure third-party administrator coordination to ensure timely reporting and avoid penalties or interest.
In Summary
Overall, first quarter state law activity was shaped less by sweeping new laws and more by litigation, enforcement activity and regulatory pressure testing the boundaries of existing frameworks.
As state legislatures are largely still mid-session with hundreds of bills introduced across the spectrum of abortion and reproductive care, gender-affirming care and other benefit-related compliance areas, we may see more movement at the state level further into the second quarter this year. While most developments discussed in this update do not require immediate changes to employer-sponsored plan design, they highlight the importance of diligent monitoring of state-level changes, particularly for employers with multi-state workforces or exposure to state and local expenditure requirements. Lockton will continue to track developments and provide updates as courts, regulators and legislatures clarify obligations throughout the remainder of the year.
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Consulting group are not privileged under the attorney-client privilege.
