2025 Year End Legislative Recap

2025 Year End Legislative Recap

Congress

One Big Beautiful Bill

In May, we saw the ‘One Big Beautiful Bill[1]’ pass the House and then narrowly pass the Senate a month later. In a surprising turn of events, it then became law on the heels of the 4th of July Holiday.  

§ Medicaid - One of the more contested components that made it to the final bill is the reduction to Medicaid funding. The Congressional Budget Office (CBO) estimates nearly 12 million individuals will lose their health insurance in the next 9 years under these cuts.

§ Public Marketplace/Exchange Enrollment Verification - Increased scrutiny for individuals enrolling in marketplace plans and applying for premium subsidies are added under the bill. These provisions might increase enrollment under employer sponsored health plans.

  • Maintains many provisions of the 2017 Tax Cuts and Jobs Act - Maintains the House’s permanent extension of the 199A deduction, but retains the current 20% rate (instead of the House’s 23% rate), makes permanent the lower individual tax rates

  • Additional benefits related items include:

    • Maintains the current tax exclusion for employer sponsored health insurance

    • Increases the nonrefundable child tax credit, and ties the limit to inflation

    • Permanently restores the 163(j) business interest deduction at 30% of EBITDA

    • Permanently extends the safe harbor for pre-deductible reimbursement of telehealth services under high-deductible health plan without disrupting HSA eligibility (the Act updates the IRC section 223)

    • Increases the annual contribution limit for dependent care Flexible Spending Accounts (DCAs) from $5,000 to $7,500 for married couples filing jointly, and from $2,500 to $3,750 for married couples filing separately.

    • Maintains tax free employee student loan reimbursement up to $5,250 under Section 127 through 2026; limit begins to index for inflation in 2027

    • Does not include a moratorium on state regulation of AI models and systems

    • Does not adopt the expansions to Health Savings Account allowable contributions passed by the House

 

DOL

Pharmacy Benefit Manager (PBM) Litigation

Rising costs and spiking pharmacy spending are increasing the pressure on the Government to act. Meanwhile, individual states are passing laws directed at regulation of the Pharmacy Benefit Managers (PBMs) operating within their boundaries. Despite a Federal Court in Arkansas’ decision against the State’s law[2], the U.S. District Court in Illinois upheld[3] the law which requires PBMs operating in the state to report their compensation to the State Commissioner, as well as pay a fee if their compensation is not ‘reasonable’. This circuit split may encourage the Supreme Court to take up the issue.

Employee Benefits Security Administration (EBSA)

The new head of the EBSA was confirmed in June. Daniel Aronowitz has stated the Administration’s goals for the term:

1.      Enforcement of Fiduciary Requirement for ERISA plans

2.      Issue ‘clear rules’ for employer plans sponsors

3.      Prioritize workable Final rules under Mental Health Parity

Following Mr. Aronowitz’s appointment, and pursuant to Executive Order 14216[4],  the EBSA issued an FAQ[5] addressing employee access to fertility benefits. The guidance reminds employers that ‘excepted benefits’ are not subject to the myriad provisions of ERISA and the Affordable Care Act, and states the agency’s commitment to using their authority to “...protect IVF access, reduce costs for IVF, and encourage the adoption of a full range of fertility benefits by employers…”[6] The FAQ do not explicitly deem fertility benefits to be excepted benefits, nor do they delineate a new method to offer these benefits on a standalone basis. Rather, they provide a framework for fertility benefits to potentially be offered outside of major medical plan as excepted benefits. As the Departments work to develop regulations to this effect, employers can anticipate guidance in 2026.

Supreme Court

Kennedy et al v Braidwood

In a decision that did not come as a surprise, the Court upheld the Government’s argument in defense of the Affordable Care Act (ACA) preventive care mandate, which requires services deemed ‘preventive’ to be covered by group and individual plans at zero cost to individuals. Petitioners leaned into the Constitutional provision regulating the way ‘officers of the United States’ are appointed, arguing that members of the US preventive services task force were not properly appointed to their positions. Thus, without proper appointments, the preventive care mandates promulgated by this Task Force were invalid. Justice Kavanaugh delivered the majority opinion, upholding this vital element of the ACA.

US v Skrmetti

On June 18, SCOTUS rendered a much-anticipated opinion, upholding a Tennessee law that prohibits healthcare providers from delivering gender affirming care to minors. The petitioners, transgender minors and their parents, challenged the state law on Equal Protection grounds, but the Court did not find the requisite facts necessary for heightened scrutiny.

“The law does not prohibit certain medical treatments for minors of one sex while allowing those same treatments for minors of the opposite sex. SB1 prohibits healthcare providers from administering puberty blockers or hormones to any minor to treat gender dysphoria, gender identity disorder, or gender incongruence, regardless of the minor’s sex; it permits providers to administer puberty blockers and hormones to minors of any sex for other purposes.[7]”

 

State Level Activity

New York

NYC ESSTA

The New York City Council has approved a new bill that will expand the permitted uses of Earned Safe and Sick Leave for employees located in NYC. These changes include leave use to “care for a child or care recipient, to attend a legal proceeding for subsistence benefits or housing, to respond to a public disaster or to respond to workplace violence.” Moreover, employees will also be able to use an additional 32 hours of unpaid time under ESSTA beyond the 40 (or 56, based on size) hours of paid leave already available under the law. These additional 32 hours are available upon hire, and the first day of each calendar year. All changes become effective February 22, 2026.

NY PFL

In 2026, employee after-tax payroll contributions will be 0.432% of wages to the maximum of $411.91. The leave entitlement remains steady at 12 weeks in a 52 week period, and benefit payments also remain at 67% of the statewide average weekly wage (SWAAW). In 2026 this maximum weekly benefit will be  $1,228.53.

IRS

[1] The One Big Beautiful Bill passed the House on May 22, 2025, and then was revised by the Senate and passed on July 1

[2] The Court granted Plaintiff’s motion for preliminary injunction preventing enforcement of the state law in Express Scripts, Inc. et al v. Richmond et al.

[3] Cent. States, Se. & Sw. Areas Health & Welfare Fund v. McClain, (N.D. Ill. Sept. 2, 2025)

[4] Executive Order 14216 titled ‘Expanding Access to In Vitro Fertilization’ issued 2/18/25

[5] EBSA FAQ Part 72, published 10/16/25

[6] EBSA FAQ Part 72, published 10/16/25

[7] UNITED STATES v. SKRMETTI, No. 23–477. Argued December 4, 2024—Decided June 18, 2025

[8] Senate Bill 41 was signed into law by Governor Newsome on October 11, 2025 and takes effect January 1, 2026

Guest Usermedical, healthcare, insurance, covid19, ACA, SCOTUS, DOL, health