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California Health Benefits Legislative Summary: 2026 Year-End Update

The California Legislature and Governor Newsom completed their work for 2026 at the end of September, and it was a mixed year for the regulation and funding of California health benefits. On the one hand, 2026 has been marked by a shift toward cutting, restricting, or scaling back state health benefits and Medi-Cal programs following a decade of prior expansion. Outside of publicly-funded plans, the state made changes that mandate more coverage for a variety of conditions, changed state law to conform to federal requirements as they existed at the beginning of the Trump administration, and reined in certain carrier practices that have proved frustrating for medical providers and plan members. Unless otherwise specified, the legislation summarized below only impacts fully insured health plans that are regulated by the Department of Insurance (CDI) and the Department of Managed Health Care (DMHC).

Federal law follow-ons

Several of the new laws have taken aspects of federal law and mirrored them in state statutes. The reasons for these “copycat” statutes vary. For some, the Legislature has undertaken to ensure that particular versions of federal law are preserved in California in the face of potential changes at the federal level, as is the case for AB 2011 and AB 1876. On the other hand, SB 1244 was passed in an effort to create a level of transparency for brokers and consultants for public agency plans that is similar to that in place for private employer plans at the federal level.

AB 2011 – Mental Health Parity – Nonquantitative Treatment Limitations

This law will require health insurance carriers to perform a written comparative analysis of non-quantitative treatment limitations (NQTLs) in health plans that provide both medical/surgical and mental health/substance use disorder benefits. This provision has been in place on a federal level for both fully insured and self-funded plans since the passage of the Consolidated Appropriations Act of 2021 (CAA 2021), followed by the Final Rules enacted in 2024. Those rules have been the subject of a lawsuit brought by the ERISA Industry Committee (ERIC), and are not currently being enforced, pending the outcome of the litigation. The California statute, which only applies to fully insured plans, codifies at the state level the federal rules as they existed on January 1, 2025, and goes into effect on January 1, 2027.

AB 1876 – Health Care Coverage Nondiscrimination

This law prohibits discrimination by any health insurance carrier on the basis of race, color, national origin, age, disability, or sex. Notably, it defines “discrimination on the basis of sex” to include but not be limited to discrimination on the basis of sex characteristics, including intersex traits; pregnancy or related conditions; sexual orientation; gender identity; and sex stereotypes. This definition is in keeping with other California antidiscrimination laws and with the enforcement of Section 1557 of the Affordable Care Act (ACA) prior to the current Trump administration, which has recently taken steps to limit antidiscrimination protections under the ACA. AB 1876 goes into effect on January 1, 2027.

SB 1244 – Public Agency Compensation Disclosure

This law will require a covered service provider (broker, consultant, third-party administrator or pharmacy benefit manager) to disclose to a public agency or its group health plan the direct and indirect compensation it expects to receive for providing brokerage or consulting services. Such disclosures must be made before entering into, extending, renewing or materially amending a contract or arrangement with the public agency. If compensation is initially disclosed as an estimate, there must be a subsequent revised disclosure within 120 days after the end of the contract or plan year.

Unlike the federal law, the California statute also includes provisions specific to pooled programs, such as joint powers authorities (JPAs) or labor-management trusts. For those programs, the covered service provider must provide the disclosure to the responsible official (like an executive director) and the governing body. The covered service provider must also make disclosures available, either directly or through the pool, to the governing body or responsible official of each participating public agency. Finally, covered service providers that recommend, facilitate, or materially influence public agency’s decision to participate in a pooled program must disclose all compensation it receives in connection with that recommendation. SB 1244 does not go into effect until January 1, 2028.

Coverage mandates

The second set of new benefits laws are a series of changes mandating that fully insured health plans provide coverage for certain treatments. Most of these mandates address drug treatments, reflecting the ongoing tension between the rising cost of prescription drugs and group health plans’ efforts to control costs. Many times, the costs and the effectiveness of these mandates are analyzed by the non-partisan California Health Benefit Review Program (CHBRP), to help legislators assess the impact of health insurance legislation.

Unless otherwise specified, each of these new laws will go into effect on January 1, 2027.

AB 1843 – Hepatitis C

AB 183 will prohibit a carrier from subjecting direct-acting antivirals for the treatment of Hepatitis C to prior authorization. CHBRP has estimated that premiums paid by employers and enrollees would increase upon enactment of this bill by an estimated $708,000 ($0.0020-$0.0134 per member per month). However, aggregate cost sharing among enrollees who use direct-acting antiviral drugs was predicted to decrease by $40,000.

SB 1023 – HIV/AIDs

This law adds drug devices and products to the existing law that prohibits carriers from requiring prior authorization or step therapy for HIV/AIDS treatment. Effective January 1, 2027, it will require coverage for HIV PrEP both as a medical benefit and as an outpatient prescription drug benefit. The law will apply regardless of whether an antiretroviral drug, drug device, or drug product is self-administered.

AB 1887 – Rare Diseases

AB 1887 will require that prior authorization for prescription drugs prescribed for the treatment of a rare disease be complete within 30 days of the initial request. This provision will only apply to FDA-approved drugs prescribed by a specialist with expertise in the condition or disease. Under the law, if the 30-day timeline is not met, the prescription will be treated as if it was approved.

SB 950 – Dementia

This new law will require carriers to cover all medically necessary treatments or medications that are approved by the FDA for the treatment of Alzheimer’s disease or other medical conditions affecting memory. SB 950 does allow a plan to utilize step therapy for these treatments, if at least one antiamyloid therapy is covered without step therapy.

AB 1682 – Scalp Cooling Treatment

AB 1682 will require fully insured large group health plans to provide coverage for scalp cooling as prescribed by a health care provider in connection with chemotherapy in which alopecia-inducing chemotherapeutic agents are used. Scalp cooling is an FDA-cleared, evidence-based therapy for chemotherapy-induced hair loss.

AB 1906 – Cervical Cancer Screening

This new law will require fully insured group health plans in the state to provide coverage without cost sharing for cervical cancer screening, including FDA-authorized or cleared self-collected cervical screening kits, when ordered or provided by an in-network provider and consistent with specified recommendations published by the State Department of Public Health.

AB 2233 – Behavioral Health Treatment Plans

This law will prohibit health carriers 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, and requires authorized hours to remain available for use throughout the authorization period to ensure the enrollee or insured may fully access approved treatment if the use of hours is reasonably consistent with the treatment plan and clinical guidelines and is documented in the treatment plan and progress reports. This law was enacted to protect people with autism, pervasive developmental disorder (PDD) and other behavioral health disorders from losing coverage for treatment that has already been prescribed to them and approved.

SB 331 – Hearing Aids

SB 331 will require fully insured large group plans to include coverage for services provided by a qualified audiologist with experience with children, as well as hearing aids and related services for enrollees or insureds under 21 years of age, if medically necessary. Under the law, a plan may limit the dollar coverage for each individual hearing aid device to $3,000. In its study of the legislation, CHBRP found that for some, SB 331 would permit first-time use of hearing aids, and for all newly covered hearing aid users, it would permit more repairs, replacements, testing, and recasted ear molds, which improve the effectiveness of the hearing aids. CHBRP estimates that this bill would increase premiums in the large group market by $17,320,000 across employers and enrollees, while decreasing enrollee out-of-pocket costs for noncovered benefits and cost sharing expenses by $12,015,000. This would mean an employer premium increase of $14,228,000 (0.02%) and an enrollee premium contribution increase of $3,092,000 (0.01%). This law will go into effect for fully insured large group health plans issued, amended, or renewed after January 1, 2028.

Carrier practices

Finally, the following new laws will make changes to the ways in which carriers are allowed to process claims, provide information to insureds, and use insured’s information.

SB 1094 – Biosimilars

SB 1094 will expand the ability of pharmacists and carriers to substitute lower-cost biosimilar products for brand-name biological drugs. Under the new law, a pharmacist may substitute a biological product that is biosimilar to, or interchangeable with, the prescribed product, unless the prescriber indicates “Do not substitute.” The law also extends the existing rule for HMO plans to fully insured health insurance policies, providing that a carrier may not limit or exclude coverage for a drug previously approved for an insured’s condition, as long as the drug continues to be appropriately prescribed. A carrier may, however, require a patient to try a biosimilar or interchangeable product in place of a covered reference product if specified conditions are met. These include that the alternative has a lower net cost to the carrier, the patient’s cost sharing is the same or less, the carrier gives at least 60 days’ advance notice to the patient and prescriber, and no new prior authorization is required. In addition, plans issued, amended, or renewed on or after January 1, 2027 that maintain a formulary including a reference product must also include at least one biosimilar or interchangeable product for that reference product if it has a lower net cost. Carriers must notify prescribing providers of these substitution rules by January 15, 2027, and begin reporting on the cost-sharing and premium impact of the law by October 1, 2027.

SB 1049 – Claim Reimbursements

SB 1049 will give medical providers and other claimants more time to fix claims that have been denied for correctable errors. If a carrier denies a claim, or sends a notice of overpayment, based in whole or in part on a defect that may be remedied by submitting a corrected claim, the claim submitter will have no less than 90 calendar days from the carrier’s most recent action to submit a corrected claim. The carrier may not deny a timely corrected claim on the grounds that it missed any other claim filing deadline, and disputes over corrected claims must be eligible for the carrier’s provider dispute resolution process.

AB 2499 – Claim Payments

AB 2499 addresses claim delays caused by carriers’ technology limitations. Beginning May 26, 2028, carriers must accept electronic medical records and supporting documentation needed to process a claim through a standard electronic submission method, with a file size limit sufficient for typical medical documentation. Carriers must confirm receipt electronically and may not deny, pend, or delay a claim solely because their systems cannot accept documentation that otherwise meets their requirements. The requirement does not apply while a carrier’s systems are affected by circumstances outside its reasonable control, such as power outages, natural disasters, or cybersecurity attacks. If a state or federal standard on file size or other capacity requirements is adopted, that standard will apply. This law follows in the path of the federal 21st Century Cures Act, which advances system interoperability, prohibits information blocking by providers and developers, and mandates that patients receive prompt, electronic access to their health information without charge.

AB 280 – Provider Directories

AB 280 targets so-called “ghost networks,” where provider directories list providers who are not accepting new patients, are no longer in network, or cannot be reached. Under this new law, the DMHC must select a central utility and develop uniform standards, and carriers must use that utility to collect and verify the consistency and completeness of their provider directories. The central utility will issue an annual consistency report for each directory, and carriers must attest to how they will fix any inconsistencies. Importantly for plan members, if an enrollee reasonably relies on inaccurate, incomplete, or misleading directory information, the carrier must cover the services and reimburse the provider the agreed-upon amount or, if none, a reasonable and customary amount. The provider may collect only the in-network cost sharing, which counts toward the in-network deductible and out-of-pocket maximum. Carriers must comply beginning July 1, 2027.

AB 1798 – Genetic Testing for Life and Disability Insurance

Although it does not apply to health plans, AB 1798 will affect group life and disability coverage, including certificates issued under group policies delivered in California. The law prohibits life and disability insurers from canceling, limiting, or denying coverage based on a test for the presence or absence of a genetic characteristic. Except in limited circumstances, insurers may not require, request, or solicit genetic information, use genetic test results, or consider a person’s decisions about genetic testing for any insurance purpose. An insurer may seek or consider genetic information only if it is already in the individual’s medical record, is not from a direct-to-consumer test, and is used to rule out an adverse finding with the individual’s informed, written consent. The law also prohibits the use or disclosure of an individual’s full genome and adds civil penalties for violations. It will go into effect on January 1, 2027.

Keenan is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities, and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.