Health Care Policy Trends From the 2021 State Legislative Session

Manatt on Health

The Big Picture

This month, a majority of states are beginning to adjourn their 2021 legislative sessions.1 Across the country, lawmakers considered and passed a wide range of health care legislation, including coverage expansions as well as strategies to contain prescription drug costs, address health care affordability, advance and expand telehealth, and ensure behavioral health care access.

While many states anticipated intense budget shortfalls due to lost revenue associated with the COVID-19 pandemic, most states experienced stable tax revenue during the pandemic. Coupled with an influx of federal stimulus funding from the American Rescue Plan, states have been able to invest resources in advancing health care and other programs.

This summary focuses on broad health care policy trends unrelated to the pandemic, but states are of course continuing to grapple with their response to the COVID-19 pandemic and its lasting impact. State legislatures have considered changes to state emergency power laws, appropriations for COVID-19-related tasks, economic stimulus, unemployment system reforms and expanded scope of practice for health care providers.

Outside of pandemic-related legislation, states have focused on a range of health policy issues, including expanding coverage, containing health care costs, expanding telehealth access and addressing behavioral health needs.

The following sections describe key health care policies that states have considered during the 2021 legislative session. This analysis highlights select examples of state legislation; it is not an exhaustive review of state health policy activity.

Coverage Expansion

States have explored several avenues to expand coverage this year. Recent federal policy changes also have had a significant impact on health care coverage, particularly on coverage affordability issues states have been grappling with in recent years, such as Marketplace affordability and Medicaid coverage.

Given the temporary nature of some of these federal policies, states are monitoring and anticipating future actions by the Biden administration and Congress that will further impact state coverage policies in the long term. States may reconsider or repurpose some of their coverage-related investments, depending on the outcome of federal legislation.

As a reminder, key coverage policies of the American Rescue Plan include:

  • Temporary Marketplace Premium Tax Credit Enhancements. The law increased the generosity of federal premium tax credits for Marketplace insurance plans and, for the first time, expanded eligibility for federal tax credits to individuals with income over 400% of the federal poverty line (FPL). The enhancements are in effect for 2021 and 2022. The Biden administration has proposed making these changes permanent, and Congress could consider legislation to do so later this year.
  • Enhanced Federal Medical Assistance Percentage (FMAP) for Medicaid Expansion. The law provides enhanced federal match to incentivize the 12 states that have not expanded Medicaid to expand coverage to the adult population with incomes up to 138% of the FPL. 

State Public Options. Since 2017, nearly a dozen states have considered legislation to study or implement a state-based public option. This year, legislators in multiple states—many that have studied public option models in the past2—introduced updated proposals. These states include Colorado, Oregon, Minnesota, Nevada and Connecticut. The specific program designs vary, but each proposal would use government purchasing power to offer new coverage plans to state consumers, either on the Marketplace or through existing state programs (for example, Connecticut’s plan—which failed to pass this year—would leverage the state’s employee plan). Nevada is the only state, as of this writing, to have passed its public option proposal this year.3 Washington State also passed changes to its first-in-the-nation Cascade Care public option program, which was implemented this year.

Enhanced federal premium tax credits provided by the American Rescue Plan have impacted consideration of these bills in state legislatures, since the enhancements reduce the urgency for policies to improve premium affordability for consumers. Several states have pulled back or rewritten their bills4 in response to changes to the federal Marketplace structure and stakeholder responses. To date, advocates for state public option proposals have focused on increasing consumer affordability. The enhanced premium tax credits under the American Rescue Plan remove some of the consumer affordability burdens public options were designed to alleviate, leaving future program design and the prospect of passage uncertain if the enhanced subsidies are made permanent.

State-Based Premium Subsidies and Cost-Sharing Reductions. Several states joined the growing trend of providing state-based premium and/or cost-sharing subsidies for Marketplace plans, building on federal advance premium tax credits to further lower premiums for consumers and/or expand subsidy eligibility to new groups. Washington and New Mexico enacted laws establishing such programs, including options to provide both premiums and cost-sharing reductions. The American Rescue Plan has a direct impact on these state-based affordability programs by temporarily enhancing federal premium subsidies, and as a result, the laws in New Mexico and Washington leave details about the premium and cost-sharing amounts and eligibility parameters to appropriations and rulemaking processes in response to uncertainty about the permanence of enhanced federal tax credits. Maryland also passed a more targeted program to provide premium assistance to young adults to purchase individual market coverage.

States with existing premium subsidy programs—California, Colorado, Massachusetts, New Jersey and Vermont—are also considering and taking executive action to shift dollars from premium assistance to additional cost-sharing reductions, offering subsidies to populations ineligible for federal assistance (for example, those affected by the family glitch rule or those ineligible because of immigration status), focusing on addressing the underlying costs of health care and/or possibly delaying health care reform pending further federal action. New Jersey and Colorado, for example, have already announced these changes.

Medicaid Expansion. The American Rescue Plan provides states that newly implement Medicaid expansion with significant new funding, prompting Medicaid expansion discussions among state policymakers and advocates in some of the 12 states that have yet to expand Medicaid coverage (for more information on the new federal dollars available to each state, see this Manatt Health- authored issue brief). While Medicaid expansion legislation gained traction in several states after the passage of the American Rescue Plan, legislation was not passed during any state legislative session where it was being considered (Kansas, Wyoming,5 Alabama). In Missouri, lawmakers struck funding necessary to implement a 2020 ballot initiative that amended the state’s constitution to extend coverage; litigation6 is now pending in Missouri challenging the state’s decision not to move forward with the expansion.

Addressing the coverage gap will continue to be a key point of discussion at the state level and will be informed by ongoing federal efforts to incentivize state expansion or provide an alternative coverage option.

Expanding Medicaid Coverage for Postpartum Women. States across the country have used this legislative session to pursue strategies to strengthen and expand Medicaid coverage for target populations, including authorizing their states to seek federal approval to expand postpartum coverage beyond the current 60-day period required by federal law. Some of this activity was prompted by the American Rescue Plan, which gives states the option to extend Medicaid/CHIP eligibility for pregnant people enrolled in Medicaid/CHIP for 12 months postpartum. Previously, several states sought—and the Centers for Medicare & Medicaid Services (CMS) has now approved—Section 1115 demonstrations to extend such coverage.

In April, West Virginia passed a bipartisan bill to extend postpartum Medicaid coverage from 60 days to 12 months postpartum. Texas passed a bill in the House to extend postpartum coverage to 12 months, but the bill was left pending in Senate committee at the close of session.7 Similar bills in Mississippi and Florida also failed to pass Senate committees.

Prescription Drugs

States continue to be concerned about the cost of prescription drugs and have proposed a wide variety of policies to address costs and the prescription drug supply chain in 2021.

Drug Affordability Boards. A growing number of states are implementing or considering prescription drug affordability review boards or commissions to reduce drug spending, following models implemented in recent years. Prior to 2021, at least six states (Maine, Maryland, Massachusetts, New Hampshire, New York and Ohio) enacted legislation to create an affordability board or commission. This year, at least 10 states have considered or are considering bills that would establish affordability boards, which collect and review the prices of high-cost prescription drugs, with varying levels of authority to determine payment levels for drugs deemed to pose affordability challenges. However, as of May 21, none of the 2021 bills have been signed into law.

International Reference Pricing. Using model legislation developed by the National Academy for State Health Policy (NASHP), five states (Hawaii, Oklahoma, North Carolina, North Dakota and Rhode Island) considered international reference pricing legislation this year. These bills generally seek to limit the prices that state entities, health plans regulated by the state and participating ERISA (Employee Retirement Income Security Act of 1974) plans pay for the costliest prescription drugs to the prices paid by Canada’s four largest provinces. The bills would impose $500,000 fines on manufacturers that withdraw products from the market in order to avoid the reference rate. As of June 4, no legislation has passed, with these bills failing to progress or being held for further study in four of the five states listed.8

Drug Importation Programs. At least 18 states considered legislation either expanding or establishing drug importation programs this year. In 2019, the Trump administration outlined a pathway for states to implement time-limited importation programs from Canada, which need to be certified by the U.S. Department of Health and Human Services (HHS). While HHS has not certified any such programs and the Trump-era rule is facing a legal challenge from the Pharmaceutical Research and Manufacturers of America (PhRMA), several states have made progress toward implementing importation programs by submitting proposals to HHS. President Biden indicated support for drug importation during his campaign, though the Biden administration has not acted to approve these proposals to date and is in the process of developing a response to the legal challenge. With the future of the pathway unclear, the 2021 legislative session has yielded two importation-related bills that have been signed into law, in Colorado and North Dakota. The Colorado law expands the state’s Canadian prescription drug importation program to include suppliers from outside of Canada (if the federal government authorizes this practice), and the North Dakota law calls for a legislative management study on importation, among other drug pricing issues.

Pharmacy Benefit Manager (PBM) Legislation. In recent years, states have considered a variety of interventions to regulate the activities of PBMs; the trend continued during the 2021 session. This year, 101 PBM-related bills have been introduced in 39 states. At least nine laws have been enacted during the 2021 legislative session—prohibiting PBMs from discriminating against 340B covered entities, requiring PBM licensure, establishing new reporting and transparency requirements, and setting reimbursement parameters (for example, prohibiting a PBM from reimbursing a pharmacy for pharmacy services at a rate that is lower than that at which it reimburses an affiliate or that is lower than the national average drug acquisition cost).

In December 2020, the Supreme Court ruled, in Rutledge v. Pharmaceutical Care Management Association, that state regulation of PBMs and the prices they pay pharmacies on behalf of self-funded group health plans is not preempted by ERISA. This decision has opened the door to increased state regulation over health care costs by opening a potential avenue for states to indirectly regulate self-funded plans, a large segment of the coverage market.

Fines for Unsupported Price Increases. In 2021, Massachusetts, Maine, Connecticut, Hawaii and Washington considered or are considering legislation that would impose fines on brand manufacturers for “unsupported” or “excessive” price increases. Generally, the penalty would equal 80% of the difference between the revenue generated by sales within the state of the identified drugs and the revenue that would have been generated if the manufacturer had maintained the wholesale acquisition cost from the previous calendar year, adjusted for inflation. The Hawaii and Maine bills would use the Institute for Clinical and Economic Review’s (ICER) annual unsupported price increase report to identify drugs, while Washington’s bill leaves the source open to a report by a “third party that does not use the cost-per-quality adjusted life year measure.” The Massachusetts and Connecticut bills (the only two bills still active this session) would penalize manufacturers that raise prices by more than 2% above inflation but do not mention any tie to clinical evidence. The bills, if enacted, generally would impose steep fines ($500,000) on manufacturers that withdraw products from the market in the state. These laws may face constitutional challenges to states’ ability to regulate interstate drug sales; a court struck down Maryland’s law prohibiting an “unconscionable increase in the price of a prescription drug” on this basis in 2018.

Cost Growth Containment/Affordability Boards

With states growing increasingly concerned about rising health care costs, a number of states have advanced data-driven cost transparency and accountability efforts during the 2021 legislative session.

Health Care Cost Growth Benchmarks. At least nine states9 to date have adopted cost growth benchmarking programs that bring stakeholders together to set cost growth targets for health care spending, collect data from payers to measure progress, and identify where policy or program action may be required to control health care costs.10 Nevada enacted a law establishing a benchmarking program, and California is considering similar pending legislation. States with existing programs have, in 2021, advanced legislation to increase the utility of their programs to address new and emerging cost-containment goals. For example, Massachusetts has pending legislation focused on consumer health care costs, calling for a specific cost growth benchmark for consumer out-of-pocket costs and premiums. Oregon, meanwhile, enacted a law that provides the Oregon Health Authority (OHA) with new enforcement authority for its cost benchmarking oversight, including directing the OHA to develop criteria for imposing financial penalties on providers or payers that do not participate in the program or that exceed the benchmark without reasonable cause for three out of five years.

All-Payer-Claims Databases (APCDs). Relatedly, health care cost transparency is also being advanced at the state level with the establishment of APCDs, which aim to inform policy and program action by translating raw administrative claims data into actionable information. Over the past several years, at least 21 states have passed or are considering APCDs. At the end of 2020, through the “No Surprises Act,” the federal government set aside $2.5 million per state over three years to support the establishment and enhancement of state APCDs in exchange for a level of standardization, which has spurred additional action around APCDs in the 2021 legislative sessions. For example, Georgia and Alaska both considered legislation that would establish APCDs (though neither passed during their 2021 sessions), and conversations are ongoing in other states around establishing and enhancing APCDs going forward.

Telehealth

In Medicaid, states have broad authority to permit coverage for telehealth services. Since the COVID-19 public health emergency was declared, states have been moving to pass legislation that would permanently expand access to telehealth. In the 2021 session, legislation largely focused on expanding telehealth access and coverage, specifically:

  • Extending COVID-19 flexibilities, such as including audio-only in telehealth definitions;
  • Expanding the types of services that can be covered via telehealth, such as substance use disorder (SUD) or behavioral health treatment; and
  • Requiring payment parity for services delivered via telehealth.

Expanding telehealth is a bipartisan issue with movement on the state and federal levels. In addition to the flurry of state legislative bills, dozens of bipartisan bills have been introduced on the federal level, with a handful becoming law.

Substance Use Disorder/Mental Health

Many states are exploring strategies to address rising behavioral health needs, focusing on both mental health and SUD needs. A number of states have sought creative strategies to link financing for expansions of behavioral health treatment to efforts to decriminalize substances or other initiatives. For example, New York, Washington and Montana have enacted and Oregon has introduced legislation focused on marijuana legalization as s vehicle to invest and earmark revenues to expand access to behavioral health crisis, treatment and recovery services.

States have also used this legislative session to prepare for the implementation of 988, the new three-digit number for the national suicide and mental health crisis hotline, which is intended to divert behavioral health response from the 911 system. Beginning in July 2022, states must have systems in place to route and address behavioral health crisis calls to 988. States can use 988 to support their efforts to rely on first responders trained in mental health needs. This year, some states pursued ways to enhance the behavioral health crisis system in conjunction with 988 implementation. For example, Washington, Virginia and Utah enacted legislation levying taxes on wireless and phone lines to implement statewide or regional crisis hotlines that can accept 988 calls and support the provision of an array of crisis services, including mobile crisis and crisis stabilization services.

More in-depth information is available through Insights@ManattHealth—a premium subscription service designed to help health care stakeholders keep up with the latest developments and benefit from in-depth analyses critical to their business. The content leverages Manatt Health’s legal and policy knowledge in the Medicaid, Medicare, Marketplace, life sciences, litigation, digital health and privacy spaces and includes:

  • Manatt’s weekly memo, “Insights This Week”: a roundup of the week’s federal and state policy changes
  • Regulatory and guidance summaries: detailed summaries of Medicaid, Medicare and Marketplace regulatory and subregulatory guidance, as well as synopses of health care litigation developments
  • 50-state surveys: deep dives of the latest trends in health care, including 1115 coverage waivers, 340B policies and telehealth 

For more information or a demo, please contact Barret Jefferds at bjefferds@manatt.com.


1 A detailed calendar of state legislative sessions can be found here.

2 For more information, see the state public option studies in Colorado, Nevada and Oregon.

3 As of this writing, Nevada Governor Steve Sisolak has indicated he intends to sign the public option bill. To be implemented, the Nevada plan would require federal approval.

4 For example, in Oregon, lawmakers moved from an implementation bill to a bill to fund a second public option that evaluates the impact of American Rescue Plan subsidies being made permanent, as has been proposed by the Biden administration. Oregon could alter the program or delay reform pending further federal action. As noted, the public option bill in Connecticut failed to pass for the third year, as stakeholders pushed back on a state-run program in light of additional federal support.

5 During a May hearing, the Wyoming legislature’s Joint Revenue Committee indicated support for the bill, which could signal a revival of Medicaid expansion legislation during the special session planned for July or a budget session in February.

6 Three state residents who argue that they would be eligible for Medicaid coverage under the expansion filed a lawsuit against Missouri’s Department of Social Services (DSS) (which oversees the Medicaid program) over its decision to not move forward with Medicaid expansion, arguing that DSS has the authority to use the general Medicaid appropriated funds to proceed. The case will be heard on June 18.

7 Texas has also submitted an amendment seeking authority to provide limited postpartum care services to women enrolled in the Healthy Texas Women demonstration; this amendment is still pending. Healthy Texas Women Amendment (December 8, 2020), https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/tx-healthy-women-pa2.pdf.

8 As of this writing, Rhode Island’s bill has been held for further study, North Dakota’s bill failed in the House, and Hawaii’s and Oklahoma’s legislative sessions ended without these bills’ passage.

9 States include Massachusetts, Delaware, Rhode Island, Oregon, Connecticut, Washington, Pennsylvania, Nevada and New Jersey.

10 Many of these states did so with technical assistance support through the Peterson-Milbank Program for Sustainable Health Care Costs.

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