Weekly StateVitals Update: Volume 86

National

• All 50 States Slated to Join Most-Favored-Nation Medicaid Drug Pricing Model. Last Friday, President Donald Trump announced that all 50 state Medicaid programs will join a model that applies Most-Favored-Nation (MFN) pricing for select covered drugs. Under the GENEROUS Medicaid Payment Model, participating drug manufacturers will provide rebates to state Medicaid programs to discount the net price of selected drugs to those paid in certain other countries. Over the last two years, state legislatures and policymaking groups have used Medicare Maximum Fair Prices as a reference point for state drug pricing legislation. Similarly, the GENEROUS Medicaid model could potentially serve as a baseline for future drug pricing legislation; however, details on pharmaceutical contracts and effective net prices are currently unavailable. While the Council of Economic Advisers estimates the program will generate $27.6 billion in savings for states, any impact on state budget-making is likely dependent on the release of more detailed cost information.

Arkansas

• Pharmacies Sue PBM over Alleged Underpayment. This past Tuesday, 12 Arkansas pharmacies sued a pharmacy benefit manager (PBM) in a federal court, alleging the company underpaid them for prescription medications. The plaintiffs accuse the PBM of violating Act 900 (2015), which requires PBMs to reimburse Arkansas pharmacies at no less than the drug’s National Average Drug Acquisition Cost (NADAC). Over the past year, Arkansas has been the site of substantial and highly litigated PBM and pharmacy reform legislation. The same PBM company sued the state last year over Act 624 (2025), which prohibits PBM pharmacy ownership. A federal judge blocked the law for likely violating the Commerce Clause, prompting the state to appeal up to the Eighth Circuit Court, which is scheduled to hear oral arguments on September 22.

California

• Governor Newsom Enacts Medi-Cal Community Engagement Law. Last Monday, Governor Gavin Newsom (D) signed AB 2161 into law, outlining how the state will implement Medicaid community engagement requirements for Medi-Cal. The law allows some flexibility for individuals who are found preemptively noncompliant. In particular, it requires counties to notify eligible enrollees of noncompliance within five days and allows individuals to use self-attestation that they did not receive a timely notice as good cause for not showing eligibility during a 30-day redetermination period. Additionally, the bill requires counties to maintain an enrollee’s Medi-Cal eligibility for 30 days while they wait for the Department of Health Care Services (DHCS) to verify eligibility during the 6-month redetermination. To retain healthcare coverage, AB 2161 also directs DHCS to consider all other bases of eligibility for medical assistance before denying or removing Medi-Cal coverage. California and several other states are currently challenging the implementation of community engagement requirements in a federal district court. A federal judge denied the coalition’s request for a preliminary injunction, and oral arguments are scheduled for October 20, 2026.

Connecticut

• Comptroller Scanlon Announces Regulations for Health Insurer AI Use. This past Wednesday, Comptroller Sean Scanlon announced new policies governing health insurers’ use of artificial intelligence (AI) when providing benefits to the over 270,000 enrollees under the State Employee Health Plan and Partnership Plan. Critically, Comptroller Scanlon intends to work with the legislature in 2027 to extend the following policies to all state-regulated insurance plans. The five policies prohibit exclusively using AI for adverse determinations, downcoding, reducing provider payments, or altering biller codes. Additionally, the policies prohibit using health plan member data to train AI models, require carriers and providers to disclose when AI is assisting or interacting with a member, and mandate that carriers submit their governance and audit procedures to the Comptroller. The policies are scheduled to take effect on January 1, 2027.

• Insurance Department Approves Double-Digit Rate Increases for 2027 Health Plans. Recently, the Connecticut Insurance Department issued its final rulings on five health insurance rate filings for 2027 Individual and Small Group plans. The plans are offered on Access Health CT, the state’s health insurance exchange, and cover approximately 220,000 residents. The department approved an average rate increase of 11.3% for the Individual market and 15.1% for the Small Group market. Last year, insurance regulators approved average rate increases of 16.8% for individual policies and 11% for small group policies. Additionally, to help offset rising premium costs, the state intends to continue the 2026 Connecticut premium assistance program into 2027 for individuals. 

• Superior Court Dismisses Challenge to Vaccine Law. Last Monday, a Superior Court judge dismissed a 2022 challenge against the state’s law, Public Act 21-6 (2021), that eliminated religious and non-medical school vaccine exemptions. In the lawsuit, Spillmane v. Lamont, plaintiffs alleged that eliminating religious exemptions for student immunizations violated the Connecticut and U.S. Constitutions and Connecticut’s Religious Freedom and Restoration Act (RFRA). In 2024, the Connecticut Supreme Court rejected the plaintiffs’ claims under the Connecticut and U.S. Constitutions and remanded the case to the Superior Court to review the claims under the RFRA. More broadly, the Trump administration continues its pursuit of a new federal framework for childhood vaccines that reduces the number of routinely recommended vaccines and directs states to consider updating corresponding laws and regulations. However, as of August 21, no states have changed their school vaccine policies in response.

Florida

• Board of Pharmacy Proposes Rule to Allow Pharmacists to Administer Chikungunya Vaccine. Last Thursday, the Florida Board of Pharmacy proposed a rule allowing pharmacists to administer the chikungunya vaccine. The rule follows a recent increase in reported chikungunya cases in the state, with the Department of Health reporting 189 cases this year. Missouri also took action to include chikungunya immunizations within pharmacists' scope of practice by enacting HB 2372 during its last session. Looking ahead, stakeholders may submit public comments on the proposed rule to Florida’s Board of Pharmacy through October 8. 

Idaho

• Insurance Director Cameron Recommends Interim Healthcare Committee. This past Tuesday, the Idaho Health Insurers Working Group held its second meeting, where Department of Insurance Director Dean Cameron spoke on how health insurers are regulated and related healthcare issues facing Idahoans. Legislators formed the temporary task force this summer after raising concerns about health insurance, claim denials, and a contract expiration with an East Idaho hospital with a major insurer in the state (that is now back in-network). Director Cameron previously served in the Legislature for 25 years, during which time legislators had a recurring interim committee to study healthcare issues. Cameron suggested legislators reinstate this process, though Senator Kevin Cook (R) was apprehensive. Notably, the task force is charged with assessing and recommending policy solutions for poor health insurer performance in the state; creating a permanent interim committee could potentially increase the number of health insurer-focused bills that legislators consider. The next meeting is scheduled for October 14.

Kentucky

• Governor Beshear Signs Executive Order to Erase $250 Million in Medical Debt. Last Tuesday, Governor Andy Beshear (R) signed Executive Order 2026-600 to establish the Team Kentucky Medical Debt Relief Program. The executive order directs $2.5 million to the nonprofit Undue Medical Debt, with the goal of erasing $250 million in medical debt for 130,000 Kentuckians. Their program has no application process, and residents cannot request debt relief; eligible residents will receive a medical debt relief letter showing which debts were erased and which creditors they were erased from. To qualify, Kentucky residents must owe at least 5% of their annual income for medical bills or earn at or below 400% of the federal poverty level. Within the first week, the program is expected to erase $100 million for the first 46,000 residents, with debt relief letters being sent the following week. 

Massachusetts

• Executive Office Releases MassHealth Section 1115 Demonstration Extension Request. Last Monday, the Massachusetts Executive Office of Health and Human Services (EOHHS) released its proposed 2028-2032 extension request for the MassHealth Section 1115 Demonstration. The proposal outlines several initiatives to expand access to care, improve care quality and efficiency, shift care delivery away from a fee-for-service model, support safety net funding, and maintain health coverage for eligible residents, including:

  • Continuing MassHealth’s value-based Accountable Care Organization (ACO) program.

  • Offering traditional health care services at Indian Health Service or tribal facilities.

  • Creating the Hospital Innovation and Healthy Communities (HIH-C) Program to provide incentive programs for care delivery innovation and leveraging a hospital global budget aligned with the Centers for Medicare & Medicaid Services’ (CMS) AHEAD model.

  • Establishing new 340B hospital access stabilization payments to provide hospitals with revenue outside of the 340B retail pharmacy margin.

  • Continuing the primary care sub-capitation program, diversionary behavioral health and substance use disorder services, nutrition and tenancy supports, and a reentry initiative.

  • Maintaining authority for continued payments to safety net providers.

  • Continuing premium assistance, connector subsidies, Medicare-cost sharing, eligibility processing policies, and the CommonHealth, HIV Family Assistance, and Medicare Savings programs.

  The proposed demonstration period would run from January 1, 2028, through December 31, 2032. Public comments are due by October 19.

New Mexico

• Federal Judge Denies Preliminary Injunction Request for 340B Contract Pharmacy Law. Last Monday, a federal judge in New Mexico denied a drug manufacturer’s motion for a preliminary injunction against the state’s 340B contract pharmacy protection law, HB 78 (2025). The law prohibits manufacturers from interfering with the delivery of 340B drugs to covered entities’ contracted pharmacies. New Mexico legislators passed the 2025 law in response to the manufacturer’s initiative, which allowed covered entities to place direct shipment orders for 340B drugs to an unlimited number of contract pharmacies if they submitted claims data. District Judge Kenneth J. Gonzales rejected the manufacturer’s argument that HB 78 was conflict preempted or field preempted by federal law because the 340B statute is silent about drug delivery. Thus, Judge Gonzales concluded the manufacturer did not show a substantial likelihood of success and rejected the motion. 

Texas

• Hospitals Receive $12 Billion in Restored Medicaid Funding. This past Thursday, Governor Greg Abbott (R) announced that the Centers for Medicare & Medicaid Services (CMS) had restored nearly $12 billion in Medicaid funding to Texas hospitals following months of negotiations. CMS stopped sending the supplemental funding to Texas hospitals on September 1, the first time since the funding began in 2014. CMS’ decision stemmed from a dispute between the agency and the Texas Health and Human Services Commission regarding how the state calculated provider taxes for hospitals. Both sides asserted the other was interfering with state or federal law, and through H.R.1, new limits on state-directed payments are being phased in the coming year. Without the funding, hospitals were slated to lose $27 million a day. Notably, Governor Abbott’s announcement is not clear on how or when the funds will be calculated or distributed going forward and whether providers will receive back payment for the two-and-a-half weeks when the payments were not authorized.

• Lawsuit Claims State Abortion Ban Led to a Woman’s Death. Last Tuesday, the family of a 37-year-old pregnant woman who died of preeclampsia filed a lawsuit in a San Antonio state court claiming that Texas’ abortion ban led to her death. The plaintiffs sued Texas Attorney General and U.S. Senate Candidate Ken Paxton (R), Texas Medical Board executive director Stephen Brint Carlton, the University of Texas Health Science Center, and the doctors who provided care. In particular, the lawsuit holds AG Paxton and Director Carlton responsible for Tierra Walker’s death because they uphold the state’s near-total abortion ban. Texas remains at the center of several abortion lawsuits. Most prominently, AG Paxton and Florida Attorney General James Uthmeier (R) sued the U.S. Food and Drug Administration (FDA) to permanently revoke the agency’s approval of Mifepristone and all subsequent decisions to increase access, including telehealth and mail-order dispensing. A federal district judge granted the FDA a stay on the lawsuit until the agency completes its safety review for mifepristone or December 1, 2026, whichever comes first.

• Supreme Court Rejects Surrogate’s Request to Keep Child in Texas. Last Thursday, the Texas Supreme Court rejected an Alaskan surrogate’s request to keep the child she delivered for a California couple in Texas. The surrogate alleges the biological parents requested that she undergo an abortion for the child after learning of the baby’s serious heart defect during pregnancy, choosing to deliver the baby in Texas, which has a near-total abortion ban. The Texas Supreme Court’s decision marks the latest development in the multi-state surrogacy case over parentage and custody; so far, courts in California, Alaska, and Texas have supported the parents’ custody rights. Recently, the surrogate also filed an emergency appeal to the U.S. Supreme Court to halt a California court order recognizing the couple’s parentage. Critically, federal court intervention could impact state laws on parentage and custody when it comes to multi-state surrogacy agreements, potentially pulling providers and hospitals into future disputes over custody and consent.