On February 4, 2025, President Trump imposed 10% tariffs on goods coming from China, while Canada and Mexico have pushed their 25% tariffs off by a month to allow for negotiations. The tariffs were meant to provide leverage for the United States to implement border policies impacting immigration and fentanyl. Consumers may see a secondary area of impact outside of the more well-known goods coming from China—specifically, the cost of generic drugs. Many pharmaceutical ingredients for generic drugs are made in China, and the costs for importing these ingredients will likely increase, which will in turn, increase the price of generic drugs. The 25% tariffs that could be levied on Canadian goods may impact U.S.-based drug importation programs as well. Additionally, the tariffs against Mexico could potentially increase costs for medical devices, as Mexico is a main importer of these devices.

On January 24, 2025, the U.S. District Court for the District of New Jersey dismissed the charges (without prejudice) in Lewandowski v. Johnson & Johnson for failure to prove that the lead plaintiff, Anne Lewandowski, had Article III standing. The class action lawsuit was filed on March 12, 2024, alleging that Johnson & Johnson breached fiduciary duties owed under ERISA by failing to properly oversee its prescription drug program. The lawsuit claimed that this resulted in higher prescription drug costs to the plan causing harm to the plan participants via increased premiums and reduced wages (further detail in our eAlert). The judge ruled that the injury alleged was “speculative and hypothetical” and therefore did not meet the requirements for standing. This is a temporary victory for Johnson & Johnson. The charges were dismissed without prejudice, so the plaintiffs are likely to return with a lead plaintiff that does not have the standing issues that Anne Lewandowski had. Also, a similar case, Navarro v. Wells Fargo, does not suffer from the same shortcomings in standing that the Johnson & Johnson case suffered from.

On January 20, 2025, President Donald Trump issued an executive order that prohibits the use of federal funds to promote what the order refers to as, “gender ideology.” The order defines gender ideology as “an ever-shifting concept of self-assessed gender identity, permitting the false claim that males can identify as and thus become women and vice versa, and requiring all institutions of society to regard this false claim as true,” and “includes the idea that there is a vast spectrum of genders that are disconnected from one’s sex.” While this policy has not impacted employee benefits yet, it signals the approach that the Trump administration will take toward a variety of matters including discrimination under Affordable Care Act Section 1557, rights to gender affirming care, and more.

On January 20, 2025, his first day in office, President Donald Trump issued a series of executive orders set to repeal a number of healthcare initiatives put in place by the Biden Administration. Among the numerous executive orders he issued, President Trump rescinded the executive order from the Biden administration that instructed the Centers for Medicare and Medicaid Services (CMS) to pursue alternative funding paths for prescription drugs for Medicare and Medicaid beneficiaries. This initiative aimed to lower the costs of prescription drugs for Medicare and Medicaid, as well as in the general consumer market. Additionally, President Trump repealed an executive order from the Biden administration that expanded the enrollment period for those looking to enroll in ACA Exchange plans. It also retracted the expanded federal subsidies to help make these Exchange plans more affordable. President Trump also rescinded an executive order from the Biden administration that instructed administrative agencies to review the impact of short-term, limited duration indemnity (STLDI) plans on healthcare and which led to additional notice requirements during the Biden administration.  President Trump also signed an order to withdraw the United States from the World Health Organization, a move that could potentially alter how the country will respond to public health emergencies.

On January 20, 2025, as part of his first week in office, President Donald Trump announced that he would reinstate the members of the military who were terminated for refusing the COVID-19 vaccine. The President said in his inauguration speech that he will reinstate any service members who were unjustly expelled from the military for objecting to the COVID vaccine mandate with full back pay. This is one of many promised sweeping changes that the President announced during his first week in office.

On January 17, 2025, the ERISA Industry Committee (ERIC) filed a lawsuit in the U.S. District Court for the District of Columbia against the Department of Health and Human Services (HHS) challenging the validity of the 2024 Mental Health Parity and Addiction Equity Act (MHPAEA) final rule. Specifically, the lawsuit questions the regulatory reach of the 2024 MHPAEA final rule through the “meaningful benefits” provision, the “material differences in access” standard, the NQLT comparative analysis requirements, the fiduciary certification requirement and the January 1, 2025 applicability date. The lawsuit alleges that these aspects of the new MHPAEA regulations were unlawful in that they violated the Administrative Procedures Act, exceeded HHS’s statutory authority under MHPAEA, violated the due process clause in the 5th amendment, and that the requirements were “arbitrary and capricious.” ERIC is asking for an injunction from the court inhibiting the implementation of the final rule. While the outcome of this case could alter the MHPAEA landscape tremendously, presently there is no change for plan sponsors in acting in accordance with all relevant MHPAEA regulations.

On January 15, 2025, the Internal Revenue Service (IRS) released guidance regarding the tax treatment of Paid Medical and Family Leave (PFML) benefits. This ruling comes as more states introduce PFML programs. Employers are advised that the amount they contribute toward PFML on behalf of employees can be deducted as excise tax payments. Employees can deduct their contributions as income tax paid if they itemize deductions. Additionally, the amount of PFML benefits that are attributable to employer contributions are to be included in the employee’s gross income.

On January 14, 2025, the Departments of Health and Human Services, Labor and the Treasury (Agencies) released FAQ guidance on aspects of the Gag Clause Attestation Requirement set forth in the Consolidated Appropriations Act of 2021 (CAA). Specifically, the Agencies clarified that health plans may not enter into agreements with their service providers or TPAs that allow “downstream agreements” with secondary vendors which restrict access to the data relevant to the plan. Additionally, health plans cannot enter into an agreement with a third party administrator (TPA) or service provider that would restrict the plan from providing de-identified claims data to a business associate at the will of the TPA or other service provider. Lastly, the Agencies clarified that a health plan must still file the annual Gag Clause Attestation even if their plan is in violation of the CAA’s gag clause requirements. The attestation must detail how the plan is being violative in the “additional information” box within the attestation form.

On July 1, 2026, Maryland will begin their Paid Family and Medical Leave Insurance (FAMLI) program. Contributions to the plan begin in July 2025. Maryland FAMLI will provide employees with up to 12 weeks of job protected leave and eligibility for up to $1,000 in wages per week. Beginning July 1, 2025, employers and employees will start to contribute toward the state FAMLI fund, with the exception of employers who elect a private plan. Employers who wish to implement a private plan will need state approval for such a plan. As such, proposed regulations have been issued to determine the proper course for an appeal of a private plan denial by the state.

FAMLI can be used for the birth of a child, one’s own or a family member’s serious health condition, or to make arrangements for a family member’s military deployment. To be eligible, an employee must have worked at least 680 hours in the four quarters preceding the leave in a Maryland-based position. Contribution rates depend on employer size. Employers with 15 or more employees will need to contribute 0.9% of covered wages, up to the social security cap, with 0.45% being withheld from employees. Employers with fewer than 15 employees will need to contribute 0.45% of covered wages, all of which can be withheld from the employee.

Beginning May 1, 2026, Maine will begin to pay out benefits under its new Paid Family and Medical Leave Program. The Maine PFML program will be funded by both employer and employee funds, with employer rates varying by employer size. Employers with one or more employees in Maine began payroll withholdings to collect this premium effective January 1, 2025 in order to fund the benefit.  Additionally, Maine has released a set of FAQ guidance to further assist in understanding the new program. The program will be administered by the Maine Department of Labor.

On January 15, 2025, the Departments of Treasury, Internal Revenue Service, Labor and Health and Human Services (Agencies) rescinded a proposed rule from October 28, 2024, that would have expanded access to contraceptive services under the Affordable Care Act (ACA). Specifically, the proposed rule sought to modify the ACA’s current rules to enhance access to preventive services that were deemed medically necessary by an individual’s provider. The proposed rule would have required coverage of recommended over-the-counter contraceptive methods without a prescription, as well as drug or drug-led combination contraceptive products deemed medically necessary. It would have done so without imposing cost-sharing requirements, and would also have required this enhanced contraceptive coverage to be disclosed via the internet self-service price comparison tool (or by paper, if requested by the participant), as required by the Transparency in Coverage regulation.  The Agencies have rescinded this proposed rule to focus on improving other areas of the ACA, including its cost-sharing requirements.

On January 6, 2025, the U.S. Department of Health and Human Services published a proposed regulation aiming to update the standards for the security of electronic protected health information (ePHI). Specifically, the proposed regulation includes updates to the Security Rule under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as well as the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act) governing the protection of ePHI. In response to increased cybersecurity attacks, the proposed rule seeks to set stricter standards for the use and distribution of ePHI by covered entities and business associates. The proposed rule also includes updates to definitions of terms to adapt to the changing cybersecurity environment and updates to privacy standards for handling ePHI by covered entities. If the regulation is finalized as proposed, sponsors of group health plans that are covered entities will need to enhance encryption of ePHI in accordance with these standards.