Health Plan Compliance Areas to Watch in Early 2025

Now that the Presidential inauguration is in the rearview mirror and during these early days of the second Trump administration, Risk Strategies has compiled a non-exhaustive list of key health plan-related compliance area highlights for employer plan sponsors to be aware of and monitor in early 2025.

On the judicial front, see below for details regarding several cases that we are watching closely:

1. Becerra v. Braidwood Management: U.S. Supreme Court case, which initially struck down certain parts of the Affordable Care Act (ACA) requirement for health plans to cover preventive services without participant cost-sharing on constitutional grounds. The district court ruling also specifically struck down the preventive service requirement to cover medication that prevents HIV (commonly known as PrEP) on religious grounds. Click here for a Risk Strategies article with more details.

   This case is expected to be argued at the U.S. Supreme Court in April 2025 with a decision anticipated in June or July 2025.

   If the U.S. Supreme Court strikes down certain ACA preventive care mandates in this case, health plans will not be required, but may still choose to, cover certain services without participant cost-sharing.

2. U.S. v. Skrmetti: U.S. Supreme Court case challenging a Tennessee state law banning the use of puberty blockers and hormone therapy for transgender minors. Oral argument was heard on this case on December 4, 2024.

   On February 7, 2025, the U.S. Department of Justice under the Trump administration notified the Court that their position with respect to this state law changed from the prior administration, which argued that this law violates the Constitution’s equal protection guarantee. As such, the DOJ withdrew its challenge to the law but still urged the Supreme Court to still decide the dispute and issue an opinion. A decision in this matter is expected in late spring/early summer 2025.

   Coverage of gender identity-related medical services for minors continues to be a sensitive and politically charged issue for many group health plan sponsors. Fully insured health plan sponsors are required to adhere to state law while self-funded group health plan sponsors will generally follow their third-party administrator’s (TPA) medical management policies in this realm, particularly if the TPA is considered a “covered entity” under Section 1557 of the Affordable Care Act.

   On a related note, President Trump issued two executive orders (EO) in this realm:

   • An EO, issued on January 20, 2025, to revoke EO 13988, signed by former President Biden on Jan. 20, 2021. EO 13988 aimed to prevent and combat discrimination on the basis of an individual’s gender identity or sexual orientation, including in the workplace.
   • An EO, issued on January 28, 2025, with the stated goal to prohibit or limit gender-affirming care for Americans under 19 years old by withholding federal funding and directing federal agencies to take measures to prevent surgeries, hormone therapy, puberty blockers, and other gender identity-related care services. Of note, this EO directs the Secretary of Health and Human Services (HHS) to take “regulatory and sub-regulatory actions” to achieve its goal and is currently subject to legal challenges.

   While there is no immediate impact to most employer-sponsored group health plans as a result of these two recent EOs, there could be downstream impacts to group health plan coverage of gender identity-related medical services, depending on the outcome of the Skrmetti case and future regulatory (and sub-regulatory^[1]) developments.

3. Oklahoma Pharmacy Benefit Manager (PBM) Suit: On Oct. 7, 2024, the U.S. Supreme Court invited the solicitor general of the United States to file a brief in the case of Pharmaceutical Care Management Association (PCMA) v. Glen Mulready, with respect to the issue of whether the Employee Retirement Income Security Act of 1974 (ERISA) preempts certain provisions of an Oklahoma law aimed at regulating PBMs.

   PBMs are third parties that manage prescription drug benefits under group health plans, including, but not limited to, negotiating rebates with drug manufacturers, designing pharmacy networks and processing prescription drug claims.

   In recent years, state laws regulating PBMs have increased nationwide as the PBM industry continues to face growing scrutiny with minimal federal regulation. In fact, between 2017 and 2023, all 50 states have enacted at least one PBM-related law. As a result, the issue of whether ERISA preempts these state laws has become a significant point of legal controversy. Supreme Court review is pending on this case.

   ERISA Preemption: Generally, ERISA preempts all state and local laws that “relate to” ERISA employee benefit plans, meaning the state law has an “impermissible connection with” or a “reference to” an ERISA plan.

   On a practical level, the doctrine of ERISA preemption prevents multistate employers of self-funded group health plans from having to comply with a patchwork of state and local mandates that would make plan administration challenging for these employers.

4. Dismissal of the J&J ERISA health plan fiduciary lawsuit: The J&J ERISA health plan fiduciary lawsuit, which attracted significant attention in the group health plan space, was recently dismissed for lack of standing, rather than decided on the merits (click here to learn more and for a background of the lawsuit). Nonetheless, group health plan sponsors are still advised to focus on bolstering their health plan’s ERISA fiduciary compliance efforts as class-action litigation risks is likely to continue in this space.

   Contact your Risk Strategies account team members or contact us directly here for helpful ERISA health plan fiduciary resources.

5. Tobacco surcharge litigation: Amid a recent flurry of class-action lawsuits targeting plan tobacco surcharges, refresh your knowledge of the relevant HIPAA wellness programs rules by reviewing Risk Strategies’ prior article here.

6. Stanley v. City of Sanford, Florida: U.S. Supreme Court case involving whether a former employee, who was qualified to perform her job and who earned post-employment health benefits while employed, can sue for discrimination under the Americans with Disabilities Act (ADA) over post-employment fringe benefits. Oral argument was heard on this case on January 13, 2025, and a decision is expected in late spring/early summer 2025.

   The outcome of this matter will likely have implications for employers offering post-employment health benefits.

On the legislative front, see below for key developments we are tracking:

1. Expiration of telehealth relief for Health Savings Account (HSA)-qualifying High Deductible Health Plans (HDHPs): HSA-qualified HDHPs with plan years that begin in 2025 or later are not permitted to provide pre-deductible coverage of telehealth and other remote care benefits.

   HSA-related telehealth relief was a popular group health plan provision that initially became effective in 2020 as a result of COVID-related legislation, and was subsequently extended by Congress in 2021 and 2022. It expired on December 31, 2024. Click here for a Risk Strategies article with more details.

   Government funding legislation proposed in December 2024 initially included extending, once again, this telehealth safe harbor relief for HSA-compatible HDHPs for two more years through December 31, 2026. However, it was ultimately stripped out of the final bill that passed on December 20, 2024.

   This HSA-related telehealth relief might come up again in upcoming government funding legislation slated for March 14, 2025, or even sometime later this year.

2. Expiration of expanded premium tax credit subsidies for ACA Exchanges: The Affordable Care Act (ACA) created competitive marketplaces, known as Health Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private health insurance. The ACA also created health insurance subsidies, in the form of premium tax credits and cost-sharing reductions, to help eligible individuals and families purchase health insurance through an Exchange.

   Generally, the ACA provides subsidies for individuals and families with income levels between 100% and 400% of the federal poverty level (FPL).

   Effective for 2021 and 2022, the American Rescue Plan Act of 2021 (ARPA) temporarily expanded eligibility for Exchange subsidies by removing the income cap, allowing individuals and families with incomes above 400% of FPL to qualify for a subsidy. The Inflation Reduction Act of 2022 extended this temporary eligibility expansion through the end of 2025. If Congress does not extend these ACA subsidies sometime in 2025, they are set to expire at the end of the year. As such, group health plans could experience increased enrollment by their employees who previously qualified for expanded Exchange subsidies.

3. Return of the ACA individual mandate: The ACA required most individuals to obtain sufficient health insurance coverage for themselves and their family members or pay a penalty. This rule, which took effect in 2014, is often referred to as the “individual mandate.”

   As a result of the 2017 Tax Cuts and Jobs Act, the ACA’s individual mandate penalty was reduced to zero, effective in 2019 and extended through the end of 2025. Currently, individuals cannot be penalized under federal law for failing to obtain sufficient health coverage through 2025. However, if tax legislation is not passed to extend the individual mandate penalty reprieve, it will return for 2026.

4. Federal PBM-related legislation: On a related note regarding PBM scrutiny detailed above here, we are watching if bipartisan federal legislation titled “Lower Costs, More Transparency Act” (R. 5378), which passed in December 2023 by the U.S. House of Representatives, progresses through Congress to enactment this year in some form. Among other goals, this legislation mandates greater PBM transparency, including requiring disclosure of negotiated drug rebates and discounts, as well as compensation, to group health plans.

   In a similar vein, “The Patients Before Monopolies (PBM) Act” was introduced in Congress in December 2024 on a bipartisan basis and could have significant oversight implications for PBMs if reintroduced this year. This legislation would prohibit a parent company of a PBM or a health insurer from owning a pharmacy business and also require that a parent company in violation of the legislation divest its pharmacy business within three years.

On the regulatory front, President Trump issued a memorandum on January 20, 2025, ordering a “Regulatory Freeze Pending Review”, which directed federal executive departments and agencies to refrain from proposing or issuing regulations until they have been reviewed and approved by a department or agency head appointed by President Trump. This holding pattern for new regulations, including those related to group health plans, is in effect for 60 days from January 20, 2025.

On a final note, the broad policy debate of limiting or capping the income and payroll tax exclusion for employment-sponsored health plan coverage is back in earnest to some degree with Republican control of the White House and Congress.

As a reminder, contributions towards health plan coverage by employers^[2] and employees (in most cases)^[3] are not subject to income or payroll taxes. This tax exclusion dates back to World War II wage and price controls^[4] measures and continues to the present day. Click here and here for more details as we continue to watch this policy debate closely this year.

Compliance developments in the health plan space move at a fast pace. Risk Strategies will continue to follow all of these topics closely, and provide updates when available. Reach out to your Risk Strategies account team with any questions or contact us directly here.

[1] Federal sub-regulatory guidance generally means instructions, interpretations, and guidelines (i.e., notices, FAQs, memos), issued by federal agencies that are not legally binding, but which clarify and/or interpret regulations and laws, and provide specific directions for compliance with federal regulations.

[2] Pursuant to Internal Revenue Code Section 106(a).

[3] Pursuant to proposed Internal Revenue Code Section 125 cafeteria plan regulations since employee salary reductions under such a plan are treated as employer contributions.

[4] https://www.kff.org/wp-content/uploads/2013/01/7871.pdf