Third quarter activity highlighted in this edition of our state law update was driven primarily by litigation, enforcement actions and targeted regulatory changes affecting reproductive healthcare, gender-affirming care and several state benefit programs.
Courts and agencies addressed questions involving federal-state authority, healthcare funding, provider obligations, patient privacy and constitutional protections in both the reproductive care and gender-affirming care arenas. Meanwhile, states like California, New Jersey and Washington made advancements in benefit-related programs that may have more direct implications for employers and plan sponsors.
Executive Summary
Abortion and reproductive care: State activity included four abortion-related measures headed to November ballots, new litigation over Idaho’s abortion-ban health exceptions, First Amendment challenges to restrictions on abortion-related information and referrals, expanded protections in Massachusetts and New Jersey, and ongoing Indiana litigation involving religious freedom and patient privacy.
Gender-affirming care: Federal activity included new Medicaid and CHIP funding restrictions, a court ruling vacating an ACA essential health benefit restriction, provider billing investigations and settlements, medical record subpoena litigation and an FTC consumer protection action. States responded through funding measures, litigation and other protections affecting access to care in states such as California, Colorado, Florida, and Pennsylvania.
Other benefit-related updates: California renewed its managed care organization tax framework, and San Francisco increased its Health Care Security Ordinance expenditure rates; New Jersey enacted a Medicaid employer assessment; and Washington moved WA Cares into its benefit payment phase while increasing the WAPAL assessment rate.
Note: Many state insurance mandates do not directly apply to self-funded ERISA plans because of ERISA preemption. However, some laws discussed below impose obligations directly on employers or other entities and may apply regardless of a plan’s funding arrangement. Employers should evaluate each requirement based on its specific scope and applicability.
ABORTION AND REPRODUCTIVE CARE
Abortion returns to state ballots as litigation over prior amendments continues
Abortion policy will again go directly before voters in several states this November, while courts continue to address the scope and effect of reproductive-rights amendments adopted in earlier elections. Measures appearing on the 2026 ballot in Idaho, Missouri, Nevada and Virginia take different approaches, ranging from establishing new statutory or constitutional protections to revisiting protections voters previously approved.
Idaho voters will consider Proposition One, the Reproductive Freedom and Privacy Act, after a citizen-led initiative qualified for the November ballot in July. Unlike many recent abortion ballot measures, Proposition One would enact a state statute rather than amend the Idaho Constitution. The measure would establish rights to reproductive freedom and privacy, including abortion before fetal viability. After viability, abortion would be permitted in a medical emergency, including circumstances involving serious threats to a pregnant patient’s health. The measure also addresses conception, fertility treatment, miscarriage care and prenatal/postpartum care, and provides specified protections for healthcare providers.
The initiative itself has already generated litigation over how it will be presented to voters. In September, the Idaho Supreme Court ruled that the initial statements prepared by the secretary of state and attorney general to explain the effect of a “yes” or “no” vote did not comply with state law. The court found that the “yes” statement omitted significant provisions of Proposition One and that the “no” statement inaccurately described existing Idaho abortion law, including the circumstances under which an abortion may currently be performed to prevent a pregnant patient’s death. The court prohibited use of the challenged language and ordered state officials to prepare revised statements for the November ballot.
Voters in Nevada and Virginia will consider constitutional amendments establishing protections for abortion, although abortion is already legal in both states through approximately 24 weeks of pregnancy (commonly referred to as “viability”). In Missouri, meanwhile, voters will return to an issue they decided only two years ago. Missouri voters adopted a constitutional amendment protecting reproductive freedom in 2024; the 2026 ballot includes a measure that would reverse significant portions of that amendment and restore constitutional authority for abortion restrictions, subject to specified exceptions.
Litigation over constitutional amendments approved in previous elections also shows that voter approval does not necessarily resolve existing restrictions immediately. In Ohio, where voters added reproductive rights protections to the state constitution in 2023, the Ohio Supreme Court in August 2026 unanimously dismissed a lawsuit brought by a state judge who argued that the amendment improperly interfered with his authority in parental-notification proceedings involving minors. The court dismissed the case without an opinion. Other litigation continues over the amendment’s effect on existing abortion restrictions, including Ohio’s 24-hour waiting period, telehealth restrictions, and fetal-tissue disposition requirements.
LOCKTON COMMENT: Ballot initiatives and constitutional amendments remain an important avenue for abortion policy. As we have followed since the 2024 election, voter approval of a reproductive rights measure does not automatically resolve how existing statutes interact with the new law or constitutional language. Current cases are testing ballot language, implementation and the continued enforceability of preexisting restrictions. These disputes do not directly regulate employer-sponsored plans, but they affect the availability of reproductive healthcare across states.
Federal appeals court considers Idaho abortion-ban health exceptions
As we highlighted in our January 2026 Quarterly Alert (opens a new window), Idaho’s near-total abortion ban is being challenged as applied to patients facing serious pregnancy-related health risks that may not be immediately life-threatening. In August, a federal district court held in Seyb v. Members of the Idaho Board of Medicine that the U.S. Constitution protects against enforcement of the ban in certain circumstances where continuing a pregnancy poses a non-negligible risk of serious and lasting physical harm or a non-negligible risk of death from self-harm. The ruling did not recognize a broader right to abortion or extend protection solely on the basis of a life-limiting fetal diagnosis where the pregnancy itself does not threaten the patient’s health. The district court later narrowed the injunction to the plaintiff physician, and Idaho appealed. On Sept. 3, 2026, the Ninth Circuit entered a temporary administrative stay, leaving Idaho’s existing restrictions fully enforceable while the appellate court considers whether the injunction should remain stayed during the appeal. The Ninth Circuit heard arguments in late September but has not yet issued a decision on the case.
This litigation is separate from St. Luke’s Health System, LTD v. Labrador, the Idaho case we have also previously covered which concerns whether the Emergency Medical Treatment and Labor Act (EMTALA) preempts Idaho’s abortion ban when abortion is necessary to stabilize a patient experiencing an emergency medical condition. In that case, a federal court issued a preliminary injunction in March 2025 preventing Idaho from enforcing its abortion ban against St. Luke’s or its providers when abortion care is necessary under EMTALA standards. That injunction remains in effect while the case proceeds, with no significant substantive rulings this quarter.
LOCKTON COMMENT: The Seyb case presents a different legal theory from the EMTALA litigation we have previously covered. Rather than relying on federal statutory preemption, it argues that the U.S. Constitution itself limits Idaho’s ability to enforce its abortion ban when a pregnancy creates specified serious health risks. The Ninth Circuit’s treatment of that theory will determine whether the district court’s limited protection for the plaintiff remains available while the appeal proceeds.
Federal courts protect abortion-related information and referrals
Federal courts in Indiana and South Dakota recently blocked state restrictions affecting the dissemination of information about abortion services, reflecting a broader line of post-Dobbs litigation testing states’ ability to regulate abortion-related speech and assistance even where they may prohibit the underlying procedure within their borders. In Indiana, the Seventh Circuit affirmed a permanent injunction preventing the state from applying its “aid-or-assist” law to Planned Parenthood’s provision of information and referrals to unemancipated minors seeking legal abortion care outside Indiana. The state prohibits knowingly or intentionally assisting a minor in obtaining an abortion without satisfying Indiana’s parental consent requirements. Planned Parenthood challenged the law as applied to its practice of providing minors with factual information about legal abortion services in other states and referring or connecting patients to out-of-state providers. The Seventh Circuit concluded that those activities constitute protected speech and that Indiana could not apply its parental-consent requirements to prohibit information or referrals concerning abortions performed legally outside the state.
A federal court in South Dakota reached a similar preliminary conclusion in July, temporarily blocking enforcement of a newly enacted law against Mayday Health, an organization that provides online information about abortion medication and providers. South Dakota’s HB 1274, which took effect July 1, restricts advertising and distribution of abortion-related items in connection with abortions prohibited under state law. Mayday challenged the law after state officials asserted that it could apply to the organization’s online abortion-pill information. The district court concluded that Mayday was likely to succeed on its First Amendment claim because the law regulated speech based on its abortion-related content and the state had not shown that the restriction could survive strict scrutiny. South Dakota appealed, and on Sept. 1, the district court declined to stay the preliminary injunction while that appeal proceeds.
Massachusetts broadly expands abortion protections
Massachusetts’ governor signed legislation on Aug. 10, 2026, expanding access to abortion later in pregnancy. Effective Nov. 8, 2026, the law replaces the state’s more prescriptive framework for abortions after 24 weeks with a standard allowing physicians to rely on professional medical judgment. It also provides that a medical review process may not override the professional judgment of a treating physician and the patient or patient’s healthcare proxy and removes certain existing statutory requirements. State officials have said the changes are intended in part to address circumstances in which Massachusetts patients previously traveled out of state for later abortion care.
Indiana litigation proceeds on religious freedom and patient-privacy grounds
The Indiana Supreme Court heard arguments on Sept. 10, 2026 in the state’s appeal of a permanent injunction preventing enforcement of Indiana’s abortion ban against a certified class when obtaining an abortion otherwise prohibited by the law is required by the individual’s sincerely held beliefs. The trial court made the protection permanent in March, concluding that application of the ban in those circumstances would substantially burden religious exercise protected by Indiana’s Religious Freedom Restoration Act. The state Supreme Court has not yet issued a ruling on the case. Separately, the Indiana Supreme Court unanimously declined in June to review an appellate ruling holding that individual terminated-pregnancy reports filed with the Indiana Department of Health are confidential medical records and may not be publicly disclosed. Providers must continue submitting required reports to the state, which publishes aggregate abortion data, but the individual reports remain confidential.
New Jersey strengthens reproductive health and shield law protections
New Jersey passed legislation on Aug. 20, 2026 expanding protections for reproductive health patients and providers and expressly extending the state’s existing shield-law to gender-affirming care. Among other provisions, the law restricts state assistance with certain out-of-state care investigations and proceedings involving protected care; protects related patient information from disclosure in specified circumstances; and prevents professional licensing action based solely on a provider’s provision of protected care. The legislation also creates additional protections against interference with reproductive health services, including civil remedies for patients and providers and protections against certain professional or malpractice-insurance consequences for providing reproductive care that is legal in New Jersey. The law took effect immediately.
LOCKTON COMMENT: Many current post-Dobbs disputes concern issues adjacent to the legality of abortion itself, including physician judgment, religious-freedom claims, protected speech, referrals for lawful out-of-state care, provider reporting and confidentiality of reproductive health data. These questions will determine how patients and providers must navigate state restrictions even when the underlying abortion law is unchanged. Lockton will continue to track relevant changes in our State-by-State Guide to Abortion Laws.
GENDER-AFFIRMING CARE
Federal Medicaid funding restrictions prompt multistate challenges
In August 2026, the Centers for Medicare and Medicaid Services (CMS) finalized a rule prohibiting the use of federal Medicaid funds for certain gender-affirming procedures furnished to individuals under age 18 and federal CHIP funds for such procedures furnished to individuals under age 19. The rule represents one of the most significant federal policy developments affecting gender-affirming care since the U.S. Supreme Court’s ruling in United States v. Skrmetti and shifts the focus from state coverage restrictions to federal funding limitations. The new rule does not prohibit states from financing affected services using state-only funds outside their federally matched Medicaid and CHIP programs, and it does not affect federal funding for mental-health services. The rule takes effect on Oct. 13, 2026, although states may continue receiving federal matching funds for up to six months for hormone therapy for beneficiaries already receiving that treatment as of the effective date.
Shortly after the rule was finalized, a coalition of 22 states filed suit seeking to block its implementation. The states contend, among other arguments, that the Department of Health and Human Services (HHS) and CMS exceeded their statutory authority by categorically excluding specified medical treatments from federal Medicaid and CHIP reimbursement and that the rule violates the Administrative Procedure Act and the Constitution’s Spending Clause. The challengers argue that Congress gave states authority to make coverage determinations within the Medicaid framework and did not authorize CMS to impose the categorical exclusion adopted in the final rule. The litigation remains pending and the October 13 effective date remains in effect for now.
The funding restriction creates different practical choices depending on state law and policies. States wishing to continue covering affected services may do so with state-only funding, but federal matching funds generally will no longer be available after the rule takes effect (subject to the limited transition period for existing hormone-therapy patients). States that already restrict gender-affirming care for minors may see less immediate change, while states that require or elect to cover such services face the more significant question of whether and how to replace the federal share of funding while the legal challenge proceeds.
LOCKTON COMMENT: The final rule governs federal Medicaid and CHIP funding and does not directly restrict coverage under employer-sponsored group health plans, so its immediate effect on employer plans is limited. However, state responses may affect provider availability and access to services, and the pending litigation will test the scope of federal authority to condition Medicaid and CHIP funding.
Federal court blocks ACA essential health benefit restriction
On Aug. 14, 2026, the U.S. District Court for the District of Massachusetts vacated a provision of the federal Marketplace Integrity and Affordability final rule that would have prevented certain gender-affirming services from qualifying as essential health benefits (EHBs) under the Affordable Care Act beginning with the 2026 plan year. The provision applied to non-grandfathered individual and small-group market plans subject to the ACA’s EHB requirements. It would not have prohibited insurers from covering the affected services or states from requiring such coverage, but excluding the services from EHB status would have affected the ACA financial protections available to that coverage, including annual limits on participant out-of-pocket costs.
A coalition of 21 states challenged the provision, and the court concluded that the federal agencies had improperly modified the ACA’s statutory EHB categories without following the process required by the statute. The court therefore vacated the gender-affirming care EHB provision. As a result, the federal restriction will not take effect for the 2026 plan year unless the ruling is altered on appeal.
LOCKTON COMMENT: This ruling has limited direct application to most employer-sponsored group health plans because the challenged provision concerned the ACA’s essential health benefit requirements applicable primarily to the individual and small-group markets. EHB classifications nevertheless remain relevant to employer plans for certain ACA requirements, including the prohibition on annual and lifetime dollar limits for EHBs and the annual out-of-pocket maximum for non-grandfathered plans. Employers should continue evaluating coverage under applicable federal nondiscrimination requirements and, for insured plans, state insurance mandates.
Federal agencies continue enforcement initiatives
Federal enforcement of pediatric gender-affirming care proceeded on several fronts during the third quarter, with the Department of Justice (DOJ) and HHS focusing in part on healthcare billing and provider practices. In August, HHS released a report examining insurance coding associated with gender-affirming care for minors and referred hospitals and clinics identified in the report to DOJ and the HHS Office of Inspector General for possible investigation. HHS reported that its analysis of nationwide claims data identified approximately $50 million in claims for puberty blockers billed using an unspecified endocrine-disorder diagnosis code and nearly $11 million in claims for patients ages 13-17 using a precocious puberty diagnosis code. The report does not establish that those claims were fraudulent; rather, HHS stated that billing practices warrant further review. The DOJ’s nationwide investigation also encompasses potential violations of the False Claims Act; Food, Drug and Cosmetic Act; and other federal healthcare laws, including allegations involving diagnosis codes used to obtain reimbursement from federal programs and private insurers.
The DOJ also announced four provider agreements during the quarter. Connecticut Children’s Medical Center, Mount Sinai Health System, NYU Langone Health and UPMC agreed to stop providing specified interventions, including puberty blockers, cross-sex hormones and surgical procedures, to patients under 18. Connecticut Children’s agreed to pay a monetary penalty and dedicate an additional $500,000 in medical care, while Mount Sinai agreed to a monetary penalty and a $2 million medical care commitment. On Sept. 18, 2026, NYU and UPMC agreed to pay $8.5 million and $950,000, respectively. These agreements followed earlier resolutions with Texas Children’s Hospital and Cleveland Clinic. The DOJ expressly stated that the resolved claims are allegations only and that there has been no determination of liability; the providers have denied the allegations.
As anticipated in our June 2026 Quarterly Update (opens a new window), litigation over federal subpoenas seeking patient and provider records has proceeded on a case-by-case basis, producing differing results across jurisdictions. In July, a federal court in California preliminarily blocked the DOJ from obtaining identifying medical records of patients who received gender-affirming care as minors at Lucile Packard Children’s Hospital Stanford, finding that the patients were likely to succeed on their constitutional informational-privacy claim. Courts in New York and Rhode Island have also blocked disclosure of records sought from providers. In August, however, the Ninth Circuit revived a separate DOJ subpoena issued to Washington-based telehealth provider QueerDoc, rejecting the district court’s conclusion that the subpoena had been issued in bad faith. The appellate court did not order immediate production of the requested information, instead returning the case to the district court to consider the remaining arguments that the subpoena is overbroad and unduly burdensome. The differing outcomes reinforce the individualized nature of subpoena litigation following the denial of broader class-wide relief we discussed last quarter.
Federal enforcement has also expanded beyond the DOJ and HHS as the Federal Trade Commission (FTC) pursues a separate consumer protection theory. As we previously reported (opens a new window), the FTC has been examining whether representations concerning pediatric gender-affirming care may constitute unfair or deceptive trade practices since 2025. That effort escalated in June, when the FTC, joined by Alaska, Iowa, Nebraska and Texas, filed a consumer protection lawsuit against the World Professional Association for Transgender Health (WPATH), alleging that the organization made false or unsubstantiated representations concerning the necessity, safety and effectiveness of certain treatments for minors. The lawsuit followed separate litigation in which a federal court in May blocked an FTC investigative demand directed at WPATH after finding that the organization was likely to succeed on its claim that the investigation constituted retaliation for protected speech. In July, however, that court declined WPATH’s request to prevent the FTC from pursuing the newly filed Texas action because WPATH had not established the irreparable harm required for preliminary relief. The Texas consumer protection litigation remains pending.
LOCKTON COMMENT: Federal enforcement involving gender-affirming care now extends well beyond litigatin over state treatment restrictions or insurance-coverage mandates. Current enforcement includes billing and coding investigations, patient and provider records, negotiated resolutions with health systems and consumer protection claims. These actions generally do not create direct compliance obligations for employer-sponsored plans, but they may affect provider participation and the availability of covered services, including in states that otherwise protect access to gender-affirming care. The DOJ’s investigations also expressly encompass allegations involving reimbursement from both federal healthcare programs and private insurers, making continued monitoring particularly relevant for employers, carriers and third-party administrators.
State developments
California
California allocated $66 million in its 2026-2027 budget to support access to gender-affirming and reproductive healthcare. The funding includes $30 million for uncompensated abortion, family-planning and gender-affirming care; $10 million for gender-affirming medical and pharmacy services for children and youth that will no longer qualify for federal Medicaid and CHIP funding beginning in October; and $26 million over three years to maintain and expand the state’s gender-affirming care provider network. The funding provides a concrete example of a state using its own resources in response to the new federal funding restrictions discussed above.
Colorado
Litigation involving Children’s Hospital Colorado continued this quarter following the Colorado Supreme Court’s May 2026 order requiring the hospital to resume offering puberty blockers and hormone therapy to transgender patients under age 18 while the underlying discrimination claims proceed. The dispute subsequently shifted to whether the hospital had complied with that order after individual physicians affiliated with the University of Colorado declined to prescribe the medications, citing concerns about potential federal consequences. On Sept. 23, 2026, a Denver judge denied the families’ request to hold Children’s Colorado in contempt, finding that the hospital had complied with the order by making the services available even though individual physicians declined to prescribe them. The court concluded that the physicians were not parties to the litigation and that their individual prescribing decisions could not be attributed to the hospital for purposes of contempt. The underlying discrimination litigation remains pending.
LOCKTON COMMENT: The Colorado case separates an institution’s obligation to make services available from the independent prescribing decisions of individual clinicians. For plans and administrators, that distinction matters because a service may remain legally protected and formally available while practical access is limited by provider participation.
Florida
On July 8, the Seventh Circuit granted en banc reconsideration and stayed a federal preliminary injunction that had prevented Florida’s attorney general from pursuing state consumer protection, RICO and antitrust claims against the American Academy of Pediatrics in connection with statements supporting pediatric gender-affirming care. The order allows Florida’s state court action to proceed against the organization while the federal First Amendment challenge remains on appeal. The underlying Florida action, originally filed in December 2025, also names the WPATH and the Endocrine Society as defendants. The dispute reflects another use of consumer protection and related state enforcement authority to scrutinize statements and standards concerning pediatric gender-affirming care.
Pennsylvania
In July, the American Civil Liberties Union (ACLU) of Pennsylvania filed suit against Penn State Health, Penn State Health St. Joseph Medical Center and Pennsylvania State University after St. Joseph canceled a scheduled gender-affirming mastectomy less than 24 hours before the procedure. According to the complaint, hospital administrators informed the patient that the procedure conflicted with the hospital’s Catholic doctrine, while the lawsuit alleges that the hospital performs comparable procedures for other patients. The suit asserts claims under the Pennsylvania Constitution and Pennsylvania Human Relations Act and seeks damages and declaratory relief. Unlike most of the federal and state developments discussed above, this case involves care for an adult patient and raises state constitutional, nondiscrimination and religious-freedom questions rather than restrictions specifically targeting pediatric care.
LOCKTON COMMENT: State activity is moving in different directions: some states are funding or protecting access to care while others are using litigation and consumer protection authority to examine providers and professional organizations. For multistate employers, the practical concern is not limited to formal coverage mandates; provider participation and service availability may change as state protections and federal enforcement measures intersect. Lockton will continue to provide updates to clients in our State-by-State Guide to Gender-Affirming Care Laws.
OTHER BENEFIT-RELATED UPDATES
California
California’s 2026-2027 budget establishes a revised managed care organization (MCO) tax structure for calendar years 2027 through 2029, following federal changes that prevent the state’s existing MCO tax structure from continuing as-is after its current authorization expires on Dec. 31, 2026. The revised framework is designed to comply with new federal requirements by applying a more uniform assessment across Medi-Cal managed care plans and commercial full-service health plans licensed under California’s Knox-Keene Act. Implementation remains contingent on federal approval. Because the revised structure shifts a greater portion of the assessment toward commercial enrollment, it could increase costs for affected health plans and potentially affect future premium pricing for fully insured coverage.
LOCKTON COMMENT: The assessment is imposed on health plans rather than directly on employers, and self-funded employer plans are not subject to the tax. Employers sponsoring fully insured California coverage should monitor carrier communications regarding potential effects on future premium pricing if federal approval is obtained.
San Francisco also released its 2027 healthcare expenditure rates under the Health Care Security Ordinance (HCSO). Effective Jan. 1, 2027, covered employers with 100 or more workers must spend at least $4.49 per hour payable for each covered employee, up from $4.11 in 2026. Covered businesses with 20-99 workers and nonprofit employers with 50-99 workers must spend at least $2.99 per hour payable, up from $2.74 last year. The expenditure requirement is capped at 172 hours per employee per month. Employers subject to the ordinance should update their 2027 compliance calculations and confirm that their health plan expenditures or other permissible expenditures satisfy the increased rates.
New Jersey
New Jersey enacted a first-of-its kind Medicaid employer assessment, effective July 1, 2026, that imposes an annual fee on certain employers whose employees or their dependents receive coverage through the state Medicaid program. Employers with at least 50 Medicaid-enrolled employees during the preceding calendar year are subject to the assessment. The annual fee ranges from $325 to $725 for each Medicaid-enrolled employee and dependent, depending on the employer’s total number of Medicaid-enrolled employees. The state will notify affected employers by March 1 each year, with electronic filings and payment due by April 15. Employers may appeal an assessment but generally must pay the assessed amount while the appeal is pending.
The law excludes employees and dependents with specified development, intellectual or permanent disabilities. Beginning July 1, 2027, additional exclusions apply to employees with less than 90 days of service and to certain part-time, per-diem, temporary and seasonal employees. Employers assessed before that date for workers who later fall within those exclusions may be eligible for a credit or refund. The law also prohibits employers from using information concerning an individual’s Medicaid enrollment as a basis for adverse employment decisions.
LOCKTON COMMENT: Unlike many state healthcare assessments imposed on insurers or health plans, New Jersey’s new fee creates a direct employer obligation regardless of whether the employer’s group health plan is fully insured or self-funded. Employers with substantial New Jersey workforces should evaluate potential exposure and watch for implementing guidance regarding administration and appeals. Lockton will track further guidance in our State-by-State Guide to Assessments and Surcharges when available.
Washington
Benefits became available under Washington’s WA Cares long-term care insurance program on July 1, 2026, marking a significant milestone for the nation’s first mandatory state-run long-term care program. Eligible workers who have met contribution and vesting requirements and satisfy care need requirements may now apply for benefits to help cover qualifying long-term care services and support. New rules allow workers who previously obtained an exemption based on qualifying private long-term care insurance may voluntarily discontinue that exemption and rejoin WA Cares through June 30, 2028. Workers who discontinue an exemption will receive documentation from the Employment Security Department (ESD) that must be provided to their employer, after which WA Cares premium withholding must resume.
LOCKTON COMMENT: Although employer withholding obligations remain largely unchanged, employers should monitor program developments, including ongoing rulemaking and guidance related to eligibility, benefits administration and exemption status changes. Employers should be prepared to resume withholding premiums when an employee provides ESD documentation showing that a private-insurance exemption has been discontinued. The state is also continuing rulemaking concerning penalties and interest for unpaid premiums, exemption administration and participation by certain out-of-state workers, making continued monitoring important as the program enters its benefit-payment phase.
Finally, Washington increased the assessment supporting its Partnership Access Lines (WAPAL) behavioral-health consultation programs. For state fiscal year 2027, the assessment increases from $0.07 to $0.09 per covered life per month, beginning with the quarterly payment due Nov. 15, 2026. The assessment applies to both fully insured and self-funded health plans. For fully insured coverage, carriers generally handle the assessment. Employers sponsoring self-funded plans should confirm whether their third-party administrator (TPA) will submit the required covered life reports and payments or whether those responsibilities remain with the employer.
In summary
Third-quarter activity was driven more by court rulings, enforcement actions and targeted regulatory changes than by broad new benefit mandates. Reproductive health developments centered on state ballot measures, constitutional and First Amendment litigation and expanded state protections. Gender-affirming care activity shifted toward federal funding restrictions, insurance rules, provider investigations and settlements, subpoena litigation and consumer protection enforcement, with states responding through their own funding and legal protections. The quarter also produced several benefit-related items with more immediate employer relevance: California’s renewed MCO tax structure and higher San Francisco HCSO rates; New Jersey’s new Medicaid employer assessment; and Washington’s transition to WA Cares benefit payments and higher WAPAL assessment rate.
Most reproductive health and gender-affirming care developments discussed above do not require immediate changes to employer-sponsored health plans. The California, New Jersey and Washington benefit items warrant more direct operational review, however, and multistate employers should continue checking state-specific requirements against their plan funding, workforce locations and administrative arrangements. Lockton will update its state law resources as additional guidance and court decisions are issued.
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.
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