Weekly StateVitals Update: Volume 27 (July 7, 2025)
National
HR 1 Signed into Law with Significant Implications for States. On July 3rd, the U.S. House of Representatives was able to send H.R. 1 to President Trump’s desk for his signature, which he ultimately signed on July 4th. As expected, many of the provisions that were included in the final version amount to significant budgetary and policy implications for states. Among those provisions, albeit not all, are:
Providing the most savings under the bill is a limitation the bill places on states’ provider taxes. Under the provision, it establishes a new ceiling on a safe harbor threshold for existing hold harmless taxes in places in Medicaid expansion states (incrementally decreasing from 6 to 3.5 percent between 2028 and 2034. For all states, no safe harbor would be available for a new provider tax that would be authorized by the state after October 1, 2026.
Caps State Directed Payments after date of enactment at 110 percent of Medicare for new programs in non-Medicaid expansion states and 100 percent of Medicare for expansion states.
Beginning January 1, 2027, states will be required to adopt community engagement (work requirements) for the Medicaid expansion population and verify compliance every six months.
States are required beginning October 1, 2028 to implement cost-sharing requirements for Medicaid expansion members with income over 100 percent of the FPL, with a cap of $35 for services (albeit, some qualifying facilities – FQHCs, rural health clinics and certified community behavioral health clinics are exempt from collecting that cost-sharing amount).
States are required to redetermine eligibility for Medicaid expansion enrollees once every six months beginning in 2027.
Beginning October 1, 2026, enhanced FMAP in Medicaid expansion states would no longer apply to emergency Medicaid services provided to individuals who would qualify for Medicaid if not for their immigration status.
Authorizes the enhanced premium tax credits to sunset at the end of 2025, significantly impacting the coverage landscape in states – particularly states with state-based exchanges.
Establishes a $10 billion per year grant fund between 2026 and 2030 for rural health facilities.
Notably excluded from the final version, largely due to procedural decisions by the Senate’s Parliamentarian, were provisions pertaining to the Medicaid FMAP 10 percent penalty for coverage of undocumented immigrants, prohibiting spread pricing in Medicaid, delaying the DSH reductions, and modernizing and promoting pharmacy benefit manager accountability.
Connecticut
Governor Signs Bill Authorizing Reduction of Health Insurers’ Rate Increases. Governor Ned Lamont (D) signed SB 10 into law recently, which had been passed with near unanimous support from the Legislature and with support from the state’s Insurance Commissioner. The bill was largely opposed by industry stakeholders throughout the process. Ultimately, key elements of the bill include:
Establishes reporting requirements and enforcement provisions concerning compliance with mental health and substance use disorder benefit laws, and the parity advancement account.
Establishes prohibitions on the use of step therapy for prescription drugs for treatment of an insured with multiple sclerosis or rheumatoid arthritis.
Authorizes the Insurance Commissioner to reduce an insurer's requested rate filing by 2% if the insurer's average premium rate increase exceeded the health care cost growth benchmark for each of the past two years.
Establishes health insurance rate filing requirements that insurers must adhere to in the new review process before the Insurance Commissioner.
Prohibits any individual or group health insurance policy from imposing arbitrary time limits on reimbursement for general anesthesia services, or unilateral arbitrary limitations on reimbursement for medically necessary ancillary services.
Related to insurers’ rate increases, the Office of Health Strategy released numbers in June that proposed a benchmark target of 2.8 percent growth for each year over the next five year period.
Illinois
Governor Signs Two Significant Healthcare Bills into Law. Governor JB Pritzker this past week signed a number of healthcare reform bills into law, including some of which were part of his original budget proposal at the beginning of legislative session. Among those bills signed into law this past week:
HB 1697: Comprehensive reform of pharmacy benefits manager (PBM) practices, inclusive of banning spread pricing, prohibiting drug reclassifications without necessity, and steering of patients to certain pharmacies, among other provisions.
HB 3019: Prohibiting prior authorization for certain mental health services, such as outpatient mental health services and partial hospitalization services. The measure also requires insurers to reimburse patients for travel-related costs when they must travel beyond network adequacy limitations to receive in-network care. Finally, the measure narrows the definition of what counts as medical care for insurers when calculating their Medical Loss Ratio.
Iowa
Judge Rules that PBM Reform Law Effective Date is Delayed for Plaintiffs of Lawsuit. This past week, a federal judge granted a two-week implementation delay of SF 383, the state’s recently enacted pharmacy benefits manager (PBM) reform law. However, the restraining order is only applicable for the plaintiffs who filed the original lawsuit which argues that the law violates the U.S. Constitution because it places undue restrictions on free speech and should be preempted by the federal Employee Retirement Income Security Act (ERISA). In doing so, the injunctive relief is only inclusive of the Iowa Bankers Benefit Plan, Iowa Laborers District Council Health and Welfare Fund, Des Moines Orthopaedic Surgeons, Iowa Spring Manufacturing and Sales Co., and members of the Iowa Association of Business and Industry. However, the preliminary injunction is not applicable to any other entity subject to the new law. A hearing on the preliminary injunction is scheduled for July 14.
New Hampshire
Legislature Enrolls Measure Prohibiting Gender Affirming Care. Before legislators adjourned for regular session, the Legislature sent HB 377 to the Governor for signature. As enrolled, the measure would prohibit physicians from administering puberty blockers and hormones to transgender youth beginning in 2026. Notably, the bill includes a grandfather clause that authorizes minors who are already receiving care to continue doing so after the law goes into effect. Additionally, lawmakers sent HB 712 to the Governor’s desk which further prohibits gender-affirming genital surgeries for minors and bars individuals younger than 18 from accessing surgical procedures when used to treat gender dysphoria. It’s unclear at this time whether the Governor will sign the two bills into law. Passage of the two bills came after the Supreme Court of the United States ruled in a 6 to 3 decision that state laws banning puberty blockers and hormone treatments for transgender teens are constitutional.
New Jersey
Governor Signs FY2026 Budget into Law with Healthcare Significance. This past week, Governor Phil Murphy (D) signed the FY2026 Appropriations Act (S2026) into law. The budget signed into law appropriates $58.78 billion over the next year. Significant healthcare elements of the budget include:
$3.6 billion appropriation in hospital incentive or subsidy funding, including $336.5 million for graduate medical education, $210 million for the state’s Quality Improvement Program, and more than $600 million for charity care funding.
Appropriation of $36 million to expand Family Connects NJ, which is a program that provides free home visitations to postpartum mothers and newborns.
Continued funding to ensure coverage under Cover All Kids and NJ FamilyCare, which is expected to provide free health insurance for up to 867,000 children in FY2026.
Establishment of a new OB/GYN incentive program to recruit reproductive health care providers from Republican-led states that bolster the state’s health care workforce.
Appropriates $50 million for women’s health care programs related to safety net planning services, updating family planning facilities, and workforce development initiatives.
Appropriates $52.2 million for a new Maternal and Infant Health Innovation Authority.
Appropriates $43 million for a statewide student support services network, furthering a system of mental health resources and services for students.
The budget was approved earlier last week by the Legislature in a near party-line vote.
New York
Governor Releases Master Plan for Aging. This past week, Governor Kathy Hochul (D) released the state’s first ever Master Plan for Aging. Building on more than $45 million in appropriations for the State Office for the Aging in the FY26 state budget, the plan contains in excess of more than 100 proposals with the intent to help individuals age with dignity, independence and the support they need per the Governor’s office. The master plan’s proposals are built around the pillars of affordability of basic necessities, informal caregiver and workforce support, modernization and financial sustainability of healthcare and other similar community-based aging provider facilities, prevention and wellness promotion and access, access to services in historically underserved communities, social engagement for older adults, combatting elder abuse and ageism, and enhancing technology access and development.Most of the proposals built around the pillars are intended to be implementation through education and training, cross-system coordination, targeted regulatory changes, major budget initiatives and system changes.
Ohio
Governor Signs Budget into Law and Line-Item Vetos Some Items of Interest. This past week, Governor Mike DeWine signed HB 96 into law. The bill is the state’s budget for FY2026-2027 and it included a myriad of health provisions from a policy perspective. As part of the enacted budget, provisions include:
Implements a trigger law to Medicaid expansion, requiring the state to end Medicaid expansion coverage if the federal match were to fall below 90 percent.
Requires Medicaid eligibility redeterminations every six months for enrollees in the Medicaid expansion population.
Establishes a Rural Ohio Hospital Tax Pilot Program and assessment, with the intent to permit counties to establish a local hospital assessment to provide the nonfederal share of Medicaid payments.
Establishes limitations and guardrails for a Medicaid state directed payment program, inclusive of a cap of no more than 50 state directed payment programs during a fiscal biennium and to one state directed payment program per identified provider class.
Prohibits a contract between a Medicaid MCO and 340B “grantee” from including a payment rate for a prescribed drug that is less than the payment rate for health care providers that are not 340B grantees.
Prohibits Medicaid coverage for gender-affirming mental health care and diversity, equity and inclusion initiatives.
Prohibits a medical practice specializing in primary care that is owned or operated by a hospital or hospital system from requiring a self-pay individual or third-party payor to pay a facility fee in connection with any primary care service.
Healthcare provisions of interest impacted by the Governor’s line-item veto authority include:
Vetoed a provision that would have repealed state law requiring the Ohio Department of Medicaid to seek federal approval on a waiver that would provide continuous Medicaid enrollment for eligible children from birth through age three.
Line-item vetoed certain elements of a provision that requires 340B covered entities that are nonprofit hospitals to submit a report to the Ohio Department of Health on an annual basis beginning on July 1, 2026. As enacted, it would still require 340B covered entities to report information related to 340B drugs dispensed or administered, payments received and prescriptions dispensed.
Wisconsin
State Supreme Court Issues Ruling Finding 1849 Law Does Not Prohibit Abortion. This past week, the Wisconsin State Supreme Court found that an 1849 state law does not ban abortion in the state. Advocates had argued that the 1849 law did prohibit abortion following the overturn of Roe V. Wade and in 2022 abortion providers in Wisconsin stopped offering the procedure. Attorney General Josh Kaul (D) filed suit in court challenging the law, arguing the 1849 was not a law about abortion. In 2023, a lower court found that the 1849 law was more about feticide and not abortion. In doing so, it has since authorized other abortion law in the state to take precedence (up to 20 weeks or beyond if necessary to save the life or health of the mother). In the 4 to 3 ruling by the liberal majority, they found the Wisconsin Legislature had functionally repealed the 1849 law by enacting other laws that do regulate abortion. The ruling means that abortion care may continue to be provided in the state.
