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Key California Health & Welfare Bills to Watch in 2026: Part 2

California has seen an uptick in legislation this year that could impact health and welfare plans. Last week, we discussed bills that could impact arbitration of claims, coverage mandates and electronic claims filing. This week, we turn to pending legislation on prescription drugs, rate review, mental health parity, mid-year election changes, privacy and other topics.

The California Legislature’s summer recess is almost over. When the Legislature returns to Sacramento on August 3, 2026, the remaining bills under consideration will have an August 31, 2026 deadline to be passed by both houses. Unless specified otherwise in the descriptions below, none of these bills impact self-funded plans in California, which are governed by ERISA.

Prescription drugs

SB 964

This bill would authorize a treating health care provider and a fully insured carrier to allow the adjustment in the dose or frequency of a drug to meet the specific medical needs of a patient without prior authorization or subsequent utilization management under certain circumstances. The intent of the legislation is to lessen the administrative burden on patients with chronic conditions, and the bill is supported by various chronic disease associations. It has been approved by the Senate and by the Assembly Health Committee and will be heard in Assembly Appropriations when the Legislature returns from its summer recess.

SB 1023

This bill requires a fully insured health plan that covers non-self-administered drugs, drug devices, or drug products that are approved by the U.S. Food and Drug Administration (FDA) for the prevention of human immunodeficiency virus (HIV) and acquired immunodeficiency syndrome (AIDS) as a medical benefit to also cover those items as an outpatient prescription drug benefit.

This bill has been approved by the Senate and by the Assembly Health Committee. The Assembly Appropriations Committee has placed the bill in the suspense file. Appropriations must vote the bill out of committee by August 14, 2026 for the legislation to go to the full Assembly for a vote.

SB 1094

This bill would authorize carriers, upon 60 days’ notice to insureds and prescribing providers, to require enrollees/insureds currently prescribed a drug or biological product to try a generic or biosimilar when available at the same or lower cost-sharing, unless the prescribing provider indicates not to substitute.

The bill authorizes a pharmacist to substitute a reference product with a biosimilar when available to the patient at the same or lower cost-sharing, unless the prescribing provider indicates not to substitute. It also prohibits a pharmacy benefit manager (PBM), health care service plan, or affiliated entity from requiring the utilization of only a biosimilar product in which the entity has a direct or indirect financial interest if biosimilars not affiliated with these entities may also be available.

The bill has been passed by the Senate and by the Assembly Health Committee. It will be considered by the Assembly Appropriations Committee after the summer recess.

In its analysis of this bill, the California Health Benefits Review Program (CHBRP) estimated that it would result in approximately 27,400 enrollees being switched from a brand-name reference product to a lower-cost biosimilar, and an $87.7 million reduction in total annual premiums paid by employers and enrollees. Enrollee cost-sharing and premiums for enrollees switched from a reference product would decrease between $92 and $310 per year depending on market segment.

SB 1199

This bill would require a carrier, when calculating an insured’s overall contribution to an out-of-pocket (OOP) maximum or cost-sharing requirement, to count any amount paid by the enrollee or insured, or on their behalf, toward cost-sharing.

This would mean that any form of direct support received from drug manufacturers would count toward an insured’s annual limit on cost-sharing and the applicable in-network deductible in their plan. The bill would not apply to grandfathered plans.

SB 1199 is supported by Insurance Commissioner Ricardo Lara. The bill has been passed by the Senate and by the Assembly Health Committee. It will be considered by the Assembly Appropriations Committee after the summer recess.

Rate review

SB 1037

This bill would require the Department of Managed Health Care (DMHC) and California Department of Insurance (CDI), in collaboration with the Office of Health Care Affordability (OHCA), to conduct an enhanced rate review to determine if health care premiums are affordable.

The bill has been passed by the Senate and by the Assembly Health Committee. It will be considered by the Assembly Appropriations Committee after the summer recess.

Mental health parity

AB 2011

This legislation would codify in state law the existing federal mental health and substance use disorder parity requirements regarding Non-Quantitative Treatment Limitations (NQTLs) on mental health and substance use disorder benefits compared to medical and surgical benefits.

This includes the requirement to perform and document analyses comparing the design and application of each NQTL to assess impact on access and outcomes. This would only impact fully insured plans, for which carriers would be required to provide the comparative analyses to state regulators annually, and others upon request.

This bill has been approved by the Assembly and by the Senate Health Committee, but has been placed on suspense by the Senate Appropriations Committee. Appropriations must vote the bill out of committee by August 14, 2026 for the bill to get a full vote in the Assembly.

Mid-year enrollment changes

AB 2066

Mid-year enrollment rights are a frequent source of employer questions and confusion. AB 2066 would establish pregnancy as a triggering event for an individual to enroll in or change health plans, or add a dependent, in the California individual market.

If enacted, this change would not impact group health insurance. For group health insurance, mid-year enrollment rights are governed by the Internal Revenue Code, HIPAA and the employer’s plan documents.

Privacy in health insurance

SB 354

This bill would update the Insurance Information and Privacy Protection Act to reflect the changes in California and federal privacy laws since it was first enacted.

The obligations imposed by the bill would only apply to the processing of personal information in connection with insurance for personal, family, or household purposes. As such, it does not apply to employer-provided health and welfare plans.

AB 1979

The use of Artificial Intelligence (AI) in many aspects of life has been a concern for lawmakers this year. AB 1979 would add businesses that offer “health care chatbots” to the California Medical Information Act to ensure that they are held to the same requirements to protect private health information as health care providers.

It would also require health care providers to ensure that no clinical decision is based solely on the output of a clinical decision support system. This bill has been passed by the Assembly and by the Senate Health Committee. It is scheduled to be heard by Senate Appropriations on August 3, 2026.

Prior authorization

AB 1887

This bill would require that prior authorization or utilization review for prescription drugs prescribed to treat a rare disease be completed within 30 days of a health care provider’s initial request.

It also prohibits step therapy for prescription drugs for the treatment of a rare disease if the drug is prescribed by a specialist with expertise in the condition or disease being treated and the specialist has determined that the drug is medically necessary, unless a biosimilar, interchangeable biologic or generic is available.

This bill has been analyzed by the California Health Benefits Review Program, which estimated that AB 1887 would increase total premiums paid by employers and enrollees for newly covered benefits by 0.08%.

This bill has been passed by the Assembly and by the Senate Health Committee. It is scheduled to be heard by Senate Appropriations on August 3, 2026.

AB 2233

This bill would prohibit fully insured health plans from imposing restrictions on the utilization of authorized treatment hours within a six-month authorization period, including weekly caps or limitations that result in the forfeiture of unused hours.

It would require authorized hours to remain available for use throughout the authorization period to ensure the enrollee or insured may fully access approved treatment. Treatment hour limits come up primarily in therapeutic contexts, including those for mental and behavioral health.

This bill has been passed by the Assembly and by the Senate Health Committee. It will be heard in Senate Appropriations when the Legislature returns from its summer recess.

Health care provider contract terminations

AB 2613

This bill would require a health plan in a contract renewal dispute with a provider group or hospital to notify affected enrollees by text or email, in addition to existing requirements to provide a notice by U.S. mail 60 days before the termination date.

It would also require, if the contract dispute is resolved, the affected enrollees to be notified by text or email and U.S. mail within 60 days of reaching agreement that the enrollee has an option to return to their provider, or the plan will reassign the enrollee to another provider.

According to the bill’s author, “California patients are increasingly caught in the middle of disputes and network changes driven by large health systems and insurance companies. When contracts break down or networks shift, patients are often reassigned to new providers with little notice.”

AB 2613 is intended to modernize the methods by which enrollees are contacted regarding these network changes. This bill has been passed by the Assembly and by the Senate Health Committee. It will be heard in Senate Appropriations on August 3, 2026.

Compensation reporting

SB 1244

Under current federal law, ERISA requires brokers and consultants to prospectively report the compensation they expect to make in connection with their work for a client each year when they anticipate earning more than $1,000 annually.

Because local public agencies are exempt from ERISA, this compensation reporting does not apply to brokers and consultants in their work for those clients.

SB 1244 would enact the Public Agency Benefits Intermediary Compensation Disclosure Act, which would apply similar compensation reporting requirements to brokers and consultants when they are working for local public agencies.

This bill has been passed by the Senate and by the Assembly Health Committee. It will be heard by Assembly Appropriations when the Legislature returns from its summer recess.

Part-time community college faculty health insurance program

AB 1171

This bill requires that any unspent program funds from the Part-Time Community College Faculty Health Insurance Program be deposited annually into a newly created fund, rather than be reverted annually to the General Fund, and requires that these deposited funds continue to be used for eligible program expenditures.

According to the bill’s author, “California appropriates $200 million annually to provide part-time faculty at community colleges with healthcare coverage through a program that incentivizes Community College Districts to offer healthcare to their part-time employees. Yet only 35% of those funds are reaching their intended purpose, while the rest revert to the General Fund each year, unspent and unable to address any hurdles that prevent participation.

This bill prevents funds appropriated for this purpose from reverting to the General Fund, giving the Legislature the capital necessary to address the structural hurdles that have long prevented part-time faculty from receiving the coverage they deserve.”

AB 1171 was passed by the Assembly and by the Senate Education Committee, but it has been placed in suspense by the Senate Appropriations Committee. To receive a vote in the full Senate, AB 1171 must be referred out of Appropriations by August 14, 2026.

Nondiscrimination

AB 1876

This bill codifies under California law a federal regulation under the Affordable Care Act (ACA) to prevent a person from being subjected to discrimination by any health plan or health insurer on the basis of race, color, national origin, age, disability, or sex.

The bill would further define “discrimination on the basis of sex” for state purposes to include, but not be limited to, discrimination based on sex characteristics, including intersex traits; pregnancy or related conditions; sexual orientation; gender identity; and sex stereotypes.

This section of the ACA has become a flashpoint for litigation and executive rulemaking in recent years. The legislation would codify in state law federal guidance issued during the Biden administration.

This bill has been passed by the Assembly and by the Senate Health Committee. It will be heard by the Senate Appropriations Committee on August 3, 2026.

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