Upcoming Changes to Fully Insured Health Plans in California: What Employers Need to Know

The California legislative season drew to a close September 30th, with Governor Newsom signing several Senate and Assembly Bills that increase the benefits fully insured health plans in California must cover, focusing on maternal healthcare, preventive care, and AI protections.

Fully insured health plans provide coverage through an insurance policy purchased by an employer and are regulated by California state insurance laws. Self-insured health plans (including level-funded plans) are employer-funded and not subject to California state insurance laws.

Below is a summary of some important changes that employers sponsoring a fully insured plan in California should be aware of.

Effective January 1, 2025:

• AB 1936 - Current law requires plans to develop a maternal health program. The program must now include at least one maternal mental health screening during pregnancy, at least one additional screening during the first six weeks of the postpartum period, and additional postpartum screenings if medically necessary.
   
• AB 2129 - A contract between a fully insured plan and a health care provider must allow the provider to bill separately for devices, implants, or professional services related to immediate postpartum contraception if the birth occurs in a general acute care hospital or licensed birth center.
   
• AB 3059 - Clarifies that medically necessary pasteurized donor human milk from a licensed tissue bank is included in basic health care services required to be provided by a fully insured plan.
   
• AB 2258 - Non-grandfathered plans are prohibited from imposing cost-sharing requirements for items or services integral to preventive care services and screenings. Coverage for specified preventive care services and screenings, including home test kits for sexually transmitted diseases and certain cancer screenings, is also required.
   
• SB 1120 - Regulates the use of AI by requiring denials, delays, or modifications of health care services based on medical necessity to be made by a licensed physician or other competent health care provider. AI tools used for utilization review or management related to medical necessity must make decisions based on an enrollee’s medical history and individual clinical factors. In addition, AI tools must comply with specific oversite and disclosure requirements and be fairly and equitably applied.
   
• AB 3030 - Healthcare facilities and providers using AI to generate communications to patients regarding their health status must disclose that AI generated the communication and provide instructions for contacting a human healthcare provider. Communications regarding administrative matters and communications reviewed by a licensed healthcare provider are exempt.
   
• AB 1842 - Fully insured plans offering an outpatient prescription drug benefit must provide coverage for at least one medication in four statutory categories of drugs approved by the FDA for the treatment of acute opioid overdose and detoxification, as well as for the long-term treatment of opioid substance use disorders without prior authorization, step therapy, or utilization review.

Effective July 1, 2025:

• AB 2843 - Fully insured plans are required to provide coverage for emergency room medical care and follow-up health care treatment for individuals who have been treated following a rape or sexual assault without cost-sharing and without requiring a police report, charges to be brought against the assailant, or the assailant to be convicted of rape or sexual assault as conditions for providing coverage.
   
• SB 729 - Large group health plans (100+ employees) are required to provide coverage of IVF services, with a maximum of three cycles and unlimited embryo transfers. Small group health plans (1-100 employees) are only required to offer employers the option to cover IVF services. A letter from Governor Newsom requesting that the effective date be extended to January 1, 2026, can be found here.

Effective January 1, 2026:

• AB 3275 - Fully insured plans must pay a claim or notify the claimant that they will contest or deny the claim within 30 calendar days of receipt. Additionally, complaints about payment delays or denials will be treated as grievances that can be filed with the Department of Managed Health Care.

Consumer Protections

The Governor also signed SB 1061 into law, which, effective July 1, 2025, prohibits consumer credit reporting agencies and investigative consumer reporting agencies from including information about medical debt in consumer credit reports or investigative consumer reports and from using medical debt as a negative factor in credit decisions.

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Employers who sponsor fully insured health plans should prepare for these changes as open enrollment for calendar-year plans approaches. Employers that sponsor both a fully insured plan and a self-insured plan may face competitive pressure to voluntarily align the benefits under their self-insured plan with those required under their fully insured plan.