California has recently enacted several new laws that will impact employer compliance obligations over the next several months. These changes begin as early as September 2025 and continue into January 2026, affecting coverage mandates, preventive care standards and pharmacy benefit manager (PBM) practices.
AB 260: Abortion Medication Coverage
AB 260, effective September 26, 2025, requires California regulated health plans with prescription drug benefits to cover mifepristone even when Food and Drug Administration (FDA) labeling or federal risk evaluation strategies would otherwise limit its use. Plans must also cover approved brands or generic equivalents approved by the World Health Organization, the National Academies, or the State of California, even if those products do not have FDA approval for abortion. This mandate applies to fully insured plans issued in California and to plans written outside of California that cover California residents. It does not apply to self-insured Employee Retirement Income Security Act (ERISA) plans. These requirements were passed in response to ongoing federal litigation and uncertainty around access to medication abortion.
Employer Action:
- Employers with fully insured plans should confirm that their carriers have updated formularies and approved the required coverage.
AB 144: Preventive Care Services
AB 144 requires California regulated health plans to cover preventive services without cost-sharing or prior authorization. These services include those recommended by the U.S. Preventive Services Task Force, the Advisory Committee on Immunization Practices, the Health Resources and Services Administration, and the American Academy of Pediatrics for children as those recommendations existed on January 1, 2025. This means California is “locking in” the federal and professional standards that were in place on that date, regardless of any future changes or litigation at the federal level. After January 1, 2025, the California Department of Public Health (CDPH) may update or expand the list of covered services based on guidance from trusted medical organizations, and plans must implement those changes within 15 business days. AB 144 was enacted to protect access to preventive care considering recent federal litigation challenging similar requirements under the Affordable Care Act. This law applies only to fully insured plans and will not apply to self-insured ERISA plans.
Employer Action:
- Employers with fully insured plans should monitor updates from CDPH and confirm that carriers are applying any new or revised preventive service mandates.
SB 41: Pharmacy Benefit Manager (PBM) Regulation
SB 41, effective January 1, 2026, introduces a broad PBM oversight framework. The law bans spread pricing and requires PBMs to use pass-through pricing models so plans pay pharmacies what PBMs reimburse them, plus a transparent administrative fee. Manufacturer rebates must be returned to the plan and used to reduce premiums or participant costs. PBMs may only charge a flat management fee not tied to drug prices, although performance bonuses based on cost savings are permitted. The law also adds network parity rules, prohibits discrimination against non-affiliated pharmacies, and requires PBMs to obtain a state license by 2027. Additionally, PBMs must act in good faith and in the best interests of their clients, creating fiduciary obligations similar to those under ERISA. These requirements were enacted to address concerns about unclear PBM pricing practices and rising drug costs.
Employer Action:
- Self-insured plan sponsors should review PBM contracts for spread pricing and exclusivity clauses, update agreements to reflect SB 41 obligations, establish audit rights, and confirm licensure plans.
- Fully insured plan sponsors should work with their carriers to ensure PBM arrangements will meet the new standards.
California’s latest health plan laws signal a push toward protecting access to reproductive health care, maintaining preventive care standards, and increased transparency in prescription drug pricing. Employers with California employees, whether sponsoring fully insured plans or managing PBM contracts for self-insured plans should act to review their arrangements, confirm compliance and prepare for these changes.
Additional Resources:
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
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