Compliance Monthly Update
August 2025
A brief update on what happened the prior month in group health plan compliance at the federal level, organized chronologically. An update for the state and local level are further down. If you would like additional information, please reach out to the GBS Compliance Team.
Federal Compliance Update
Letters regarding most-favored-nation prescription pricing.
On July 31, the White House issued a fact sheet announcing that President Trump had sent letters to seventeen drug manufacturers following the May 12, 2025, executive order “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients”. The order emphasized that if manufacturers did not make meaningful progress toward providing the U.S. with most-favored-nation (MFN) pricing, HHS would be directed to issue regulations mandating MFN pricing and consider other measures to lower prescription drug costs and address anticompetitive practices. Potential actions included importation guidance, antitrust enforcement, and review of export programs. The letters note that manufacturers have not shown sufficient progress and that responses so far have focused on assigning blame rather than addressing pricing. To advance the matter, the letters require manufacturers to take the following actions by September 29, 2025:
- Provide MFN pricing for all drugs in the manufacturer’s portfolio to Medicaid patients.
- Contract with the U.S. to extend MFN pricing for newly launched drugs to Medicare, Medicaid, and commercial payers.
- Contract with the U.S. to apply revenue earned abroad toward lowering drug prices for U.S. patients and taxpayers.
- Participate in direct-to-consumer or direct-to-business distribution models for high-volume, high-rebate drugs to make them available at the lowest cost.
Nonenforcement of STLDI regulations.
On August 7, the DOL/HHS/IRS issued a statement that they will not prioritize enforcement of the 2024 regulations for short-term, limited-duration health insurance (STLDI), including the consumer notice provisions. As a reminder, STLDI plans (which provide temporary coverage for people between health insurance options) are generally not subject to ACA insurance mandates. In 2024, the agencies tightened the rules to limit how long these plans can last, to prevent their use as substitutes for ACA coverage. The regulatory agencies’ nonenforcement statement follows Executive Order 14219 directing federal agencies to review and repeal regulations that create undue burdens or exceed statutory authority. This reflects concerns that the rule limits consumer choice and oversteps agency authority. Conversely, proponents of the 2024 regulations aim to prevent people from being misled and underinsured. The agencies will undertake notice-and-comment rulemaking to consider the need for amendments to the regulatory definition of “short-term, limited-duration insurance.” HHS is also encouraging states to take a similar approach and will not penalize states that follow this enforcement policy or use their own state definitions for short-term health plans during this period. In the meantime, STLDI availability and oversight will largely depend on state approaches.
Court temporarily blocks portions of Marketplace integrity rule.
On August 22, a federal court temporarily blocked portions of the “Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability” final regulations that were issued by HHS in June of 2025 and were scheduled to take effect on August 25, 2025. HHS acknowledged the court’s ruling and identified which provisions will be delayed while litigation is pending. As a reminder, the regulations include changes to annual cost-sharing limits, eligibility and enrollment procedures, and the definition of essential health benefits
(EHBs). The federal court did not block provisions related to (1) the elimination of a 60-day extension for income verification, (2) Exchange eligibility for Deferred Action for Childhood Arrivals (DACA) recipients, (3) the modification of the EHBs definition to exclude “specified sex-trait modification procedures,” and (4) the 2026 applicability date of the updated methodology for calculating the “premium adjustment percentage” (which is used to set several ACA parameters, including the maximum annual limitation on cost-sharing).
So, the 2026 cost-sharing limitations remain $10,600 for self-only coverage and $21,200 for other than self-only coverage. However, the court found the challengers were likely to succeed on the merits with respect to the following provisions and therefore delayed their effective date pending the outcome of the litigation:
- Imposing a $5 monthly premium penalty on automatic re-enrollees in an Exchange.
- Revoking guaranteed issue coverage for individuals with past-due premiums.
- Reinstating the “failure-to-reconcile policy,” affecting eligibility for advance premium tax credits.
- Expanding verification requirements for Exchange special enrollment periods.
- Increasing verification requirements for household income.
- Changing the de minimis ranges for actuarial value calculations.
State/Local Compliance Update
A brief update on what happened the prior month in group health plan compliance at the state and local level, listed alphabetically. If you would like additional information, please reach out to the GBS Compliance Team.
California
San Francisco 2026 HCSO expenditure rates posted.
San Francisco has posted the 2026 minimum healthcare expenditure (HCE) rates under the San Francisco Health Care Security Ordinance (HCSO). The HCSO applies to employers that must obtain a San Francisco business registration certificate and have at least 20 employees in any location if at least one works in the city/county of San Francisco. The HCE is the minimum amount covered employers must spend on healthcare for each hour worked by a covered employee. Employers subject to the HCSO also need to submit an annual reporting form by each April 30 and comply with notice posting requirements. Also note that self-insured employers have until February 1 each year to top-off expenditure rates for the prior year if the employer failed to make the required healthcare expenditures during the prior year.
Delaware
Delaware modifies state paid family and medical leave program.
HB 128 was signed by Governor Meyer on July 31 and modifies the state’s paid family and medical leave program (Delaware Paid Leave) before benefits become available on January 1, 2026. The modifications under HB 128 include the following:
- Delaware Paid Leave is the primary payor of benefits. So, an employer’s disability insurance benefits may be offset by Delaware Paid Leave, per the terms of the disability policy. Other available income replacement benefits must be coordinated with Delaware Paid Leave benefits according to the terms of the policy or procedure governing other available benefits.
- Rescinds a provision that allowed an employer to require an employee to use accrued paid time off before accessing Delaware Paid Leave benefits. Instead, the law now provides that an employer may not require use of accrued paid time off prior to receipt of Delaware Paid Leave benefits. HB 128 also confirms that use of accrued paid time off to “top off” or supplement Delaware Paid Leave benefits requires both the employer and employee to agree to the top off.
- Employers may satisfy their obligations to comply with Delaware Paid Leave through a private plan. Prior to HB 125, employers were required to apply for and renew private plans between September 1 and December 1 of each year. The Delaware DOL is now required to accept applications for approval of an employer’s use of a private plan on a rolling basis, with effective dates of January 1, April 1, July 1, or October 1. Employers with self-insured private plans may begin collecting contributions as of July 30, 2025. Although there are fewer requirements imposed on employers with fewer than 25 employees in Delaware, if an employer with fewer than 25 employees in Delaware with a private plan voluntarily elects to provide coverage for any reason that is not required by the law, all the provisions of the law will be applied as if the employer were a covered employer. Finally, employers with private plans no longer need to provide claim documentation to the state, unless there is an appeal, complaint, audit, or specific inquiry from the state.
Illinois
Illinois adopts certain paid military funeral leave.
On August 1, Governor Pritzker signed SB 220 that amends (effective immediately) the state’s Military Leave Act to require employers with 51 or more employees to provide certain covered employees with up to eight hours of paid leave per month (or up to 40 hours of paid leave per calendar year) when serving on a military funeral honors detail. This leave is in addition to other paid leave an employer already provides to its employees, whether due to legal requirements (e.g., under the Illinois Paid Leave for All Workers Act) or as a voluntary company benefit.
Illinois enacts job-protected leave requirements for parents with newborns in intensive care.
On August 15, Governor Pritzker signed HB 2978 (the “Neonatal Intensive Care Leave Act”) that will require employers with 16 or more employees to provide certain amounts of unpaid leave (depending on the size of the employer) to all employees while any child of the employee is a patient in a neonatal intensive care unit (NICU). Employers with 16 to 49 employees must provide up to 10 days of unpaid leave. Employers with 50 or more employees must provide up to 20 days. This neonatal leave is in addition to leave under FMLA—that is, FMLA is used first and then the additional 20 (or 10) days must be allowed if the child is still in a NICU. This law goes into effect June 1, 2026.
