Spring 2025 Legislative Recap
Spring 2025 Legislative Recap
The Affordable Care Act (ACA)
Marketplace Subsidies
Ever since the 2021 ARPA was passed to ease the burden on employees during the global pandemic, individuals enrolling in the Public Marketplace have enjoyed enhanced premium subsidies. These subsidies have contributed to the high enrollment rate[1] and correspondingly lower number of uninsured Americans. The Congressional Budget Office estimates[2] it will cost $335 billion between now and 2035 to maintain the enhanced subsidies. As of December 31, 2025, these enhanced subsidies are set to expire, which may drive more employees to enroll in their employer plans or go without coverage altogether. It is unclear if the administration will extend them or let them lapse as scheduled.
DOL
FMLA
The DOL kicked off the New Year with an opinion letter, informing employers that they may not mandate use of paid time off (PTO) when an employee is taking a period of leave that is qualified under FMLA as well as state paid family leave. While the law permits employer policy to require use of PTO for leave that is qualified under FMLA (on the basis this leave is unpaid), the same is not true when the employee receives other sources of income replacement, such as paid family leave benefits. This stance will likely require handbook updates for employers subject to FMLA, operating in states with paid family leave laws.
Transparency in Coverage
Despite the (not so new) Transparency requirements under the 2021 CAA, which are applicable to hospital and employer health plans, pharmacy benefit managers (PBMs) have been largely operating outside of these rules. In 2024, the House passed Patients Before Monopolies Act, which is a bipartisan effort to hold PBMs to the same rules as the rest of the industry. Notably the bill would “make it unlawful for any person to simultaneously own, operate, or control – either directly or indirectly – (1) a pharmacy; and (2) an insurance company or a PBM.” There is renewed bipartisan support for this bill (including Senators Warren and Hawley) , but it will need to be reintroduced during the current Congress to see the light of day.
Mental Health Parity Addiction Equality Act (MHPAEA)
Following fiscal year 2023, the Employees Benefits Security Administration (EBSA) released their MHPAEA enforcement report to Congress. The report summarized the most commonly occurring violations of the law:
Annual dollar limits: dollar limitations on the total amount of specified benefits that may be paid in a 12-month period under a group health plan or health insurance coverage for any coverage unit.
Aggregate lifetime dollar limits: dollar limitations on the total amount of specified benefits that may be paid under a group health plan or health insurance coverage for any coverage unit.
Benefits in all classifications: requirement that if a plan or issuer provides mental health or substance use disorder benefits in any classification described in the MHPAEA final regulations, mental health or substance use disorder benefits must be provided in every classification in which medical/surgical benefits are provided.16
Financial requirements: deductibles, copayments, coinsurance, or out-of-pocket maximums.
Treatment limitations: limits on benefits based on the frequency of treatment, number of visits, days of coverage, days in a waiting period, or other similar limits on the scope or duration of treatment. Treatment limitations include both quantitative treatment limitations (QTLs), which are expressed numerically (such as 50 outpatient visits per year), and NQTLs (such as medical management standards), which otherwise limit the scope or duration of benefits for treatment under a plan or coverage.
Cumulative financial requirements and cumulative QTLs: financial requirements and treatment limitations that determine whether or to what extent benefits are provided based on certain accumulated amounts. They include deductibles, out-of-pocket maximums, and annual or lifetime day or visit limits.
Following the September 2024 Final Rule under MHPAEA, the ERISA Industry Committee (ERIC) filed a lawsuit against the DOL, HHS and IRS challenging the law. In their suit, ERIC states
“This rule goes far beyond the Tri-Departments’ statutory authority, violates the Due Process Clause of the Fifth Amendment, is arbitrary and capricious, and otherwise violates the Administrative Procedure Act. …The Parity Rule also imposes entirely new, ambiguous requirements that are so burdensome and unworkable that they will discourage employers from offering MH/SUD benefits at all.”[3]
At the time of this writing, we are still awaiting the government’s response to the lawsuit (or lack thereof), which will determine the next steps for employer plan sponsors in this area. Either way, employers should continue to work with their benefits advisors to ensure their medical plans offer mental health benefits that are on par with other covered services, and that a comparative analysis of any treatment limitations has been performed by their carrier or ASO provider.
IRS
Notice 2025-4 Tax Treatment of PFL Benefits
While state-mandated paid leave programs are not new, there has been some confusion regarding tax treatment of the contributions and paid benefits related to the programs. The IRS reminds employers that benefits paid under state paid family leave are taxable as income to the employee, but are not ‘wages’, and need to be furnished on a 1099 to each employee receiving PFL benefits in a calendar year. Additionally, employee paid premiums (salary withholding) for PFL programs are ‘wages’ reportable on the employee W2.
In contrast, benefits paid pursuant to paid medical leave are like disability benefits, and their tax treatment depends on who and how the premiums were paid. Benefits attributed to employee contributions are NOT taxable to the employee, whereas payments attributed to employer contributions ARE taxable to the employee.
The guidance notes that any employers who have not been following this protocol should do so beginning with the 2025 calendar year, and no adjustments to prior W2 is generally required under this guidance.
Rev. Proc. 2025-15 ‘Alternative Method of Furnishing’ Forms 1095-C
Days before the March 3 deadline, the IRS released Rev. Proc. 2025-15 directing employer plan sponsors how they may satisfy the newly announced ‘alternative method of furnishing’ full time employee 1095-C statements. The guidance explains that electronically posted notices with 3 components will comply with the new method:
a. An email address for employee outreach,
b. A physical address where a request for the 1095-C may be sent, and
c. A phone number to contact the employers or ACA reporting vendor for a copy of the 1095-C statement
Finally, employers are required to maintain this information as well as a copy of the 1095-C until October 15th of each year. This relief is much appreciated by employers and will improve some of the burden related to ACA reporting for years to come.
Supreme Court
United States v Skrmetti
The new administration and resulting flurry of Executive Orders have created uncertainly for employer plan sponsors when it comes to certain covered services under their health and welfare plans. This is especially true in the area of gender identity, protection, and gender affirming care. We are anxiously awaiting the High Court’s decision in United States v Skrmetti[4], a case challenging a Tennessee state law prohibiting gender affirming care for minors. The law at issue specifically prohibits health care providers from “performing certain medical procedures on an individual younger than 18 (1) to enable the individual to identify with, or live as, a gender identity inconsistent with the individual’s sex assigned at birth, or (2) to treat the individual’s discomfort or distress from such incongruence.”[5] Whether SCOUTS upholds, or strikes down this state law will have far reaching consequences for employer health plans. Notably, HHS has rescinded their 2022 guidance on Privacy of Gender Affirming Care Data pursuant to Executive Order 14187, formally stating they would not ‘promote, assist, or support gender affirming care.’[6] The Court’s decision is still pending at the time of this writing.
State Level Activity
New York
MCO Tax
As of January 1, 2025, New York State’s Managed Care Organization (MCO) tax first took effect. This is a per individual, per month tax applicable to several insurance products, including most notably, fully insured health plans filed in the state that provide Medicaid managed care plans. It is designed to increase Medicaid funding while being cost-neutral to insurance carriers.
According to the Fiscal Year 2026 Budget Bill, health plans will pay the MCO provider tax annually, based on the number of individuals enrolled in a health plan each month. This would then be codified in NY Public Health Law (Section 2807-ff) as follows:
$25 to $126 per member, per month for Medicaid plans
$7 to $13 per member, per month for essential plans
$1.50 to $2 per member per month for all other plans such as CHIP.
It is anticipated that the tax will impact 2026 renewals for New York sitused employer health plans, but the amount and details are still outstanding at the time of this writing.
[1] CMS reports record Marketplace enrollment of 24.2 million as of January 15, 2025
[2] CBO report dated June 24, 2024
[3] Case No. 25-cv-136, filed 1/17/2025
[4] U.S. v. Skrmetti, No. 23-5600 (6th Cir. Sep. 28, 2023; cert. pet. granted Jun. 4, 2024, No. 23-477)
[5] Tennessee’s Senate Bill I, enacted in 2023
[6] HHS Official Statement released February 20, 2025