A wave of federal and state healthcare policies is set to take effect in 2026, bringing major changes to hospital operations, reimbursement, insurance markets and patient access.
From the expiration of enhanced ACA subsidies to CMS’ expansion of site-neutral payments, tightened prior authorization rules and the first round of Medicare drug negotiations, 2026 will test how well the healthcare sector adapts to a fast-shifting regulatory landscape under the Trump administration.
Simultaneously, state governments are rolling out new mandates — from insulin copay caps and AI guardrails to expanded coverage requirements and immigrant protections — that will have a notable effect on hospitals, payers and patients in certain markets.
Affordable Care Act
Enhanced subsidies expire: Enhanced premium tax credits expired Dec. 31, leaving millions of marketplace enrollees facing higher premiums in 2026. The enhanced subsidies, introduced under the 2021 American Rescue Plan Act, increased subsidy amounts and expanded eligibility to households earning more than 400% of the federal poverty level, capping benchmark plan premiums at 8.5% of income. Since taking effect, the credits helped grow ACA marketplace enrollment to 24.3 million in 2025.
Congressional efforts to extend the subsidies stalled, with neither a Democratic three-year extension proposal nor a Republican alternative focused on health savings accounts passing the Senate. A House vote could still happen in early January. About 4.8 million people will lose coverage without an extension, according to the Urban Institute. Insurers have implemented the highest rate increases since 2018.
The ripple effects will extend across the healthcare industry as hospitals face a rise in uncompensated care and insurers lose membership. Total economic output could decrease by $57 billion and overall employment could decline by 286,000 jobs nationwide, including 130,000 healthcare positions, according to the Commonwealth Fund. Texas, Florida and Georgia face the steepest losses.
A handful of states have taken action to mitigate the impact, though none can fully replace federal funding long-term. New Mexico is the only state fully replacing the expired subsidies for 2026. California, Maryland, Connecticut and Colorado have committed partial funding, while Arkansas, Texas and Wyoming implemented “premium alignment” to stretch remaining federal subsidies further.
CMS finalizes 2026 rules: CMS issued the Notice of Benefit and Payment Parameters final rule for 2026, establishing standards for insurers offering health plans through federal marketplaces and state-based exchanges on the federal platform. The rule, effective Jan. 15, 2025, applies to plan year 2026.
Among the most significant changes, CMS strengthened its authority to pursue enforcement actions against brokers and agents engaged in unauthorized enrollment activity, including the ability to take action against “lead agents” at agencies where misconduct occurs. The agency also expanded its authority to immediately suspend a broker’s ability to transact with the marketplace when it identifies circumstances posing an unacceptable risk to consumers or marketplace operations.
On the financial side, the rule increases user fees following the expiration of the enhanced premium tax credits. The FFM user fee will rise from 1.5% to 2.5% of monthly premiums, while the SBM-FP fee will increase from 1.2% to 2.0%.
Additional provisions refine the risk adjustment program by phasing out the market pricing adjustment for hepatitis C drugs and adding a new cost factor for HIV pre-exposure prophylaxis medications. The rule also codifies long-standing CSR loading practices, updates standardized plan options with meaningful differentiation requirements, and expands CMS oversight of essential community provider network standards.
One Big Beautiful Bill Act
Medicaid expansion incentive ends: States that newly adopt Medicaid expansion will no longer receive the temporary FMAP boost (the two-year, 5-percentage-point increase).
Premium tax credits restricted for certain immigrants: Lawfully present noncitizens with incomes below 100% of the federal poverty line who are ineligible for Medicaid due to immigration status will no longer qualify for marketplace subsidies. CBO estimates about 300,000 people will lose coverage.
Premium tax credit repayment caps removed: Enrollees who receive excess advance premium tax credits will now have to repay the full amount, regardless of income. Previously, repayment caps applied to households under 400% FPL.
Income-based special enrollment periods eliminated: People can no longer enroll outside open enrollment based solely on income changes.
HSA eligibility expanded: Bronze and catastrophic ACA marketplace plans now qualify as HSA-eligible high deductible health plans. Direct primary care memberships can be paid with HSA funds.
Dependent care FSA limit increased: From $5,000 to $7,500 per household (if employer adopts the change).
Medicare Payment Updates
Site-neutral payment expansions and new price transparency rules: Several key hospital policies finalized by CMS will take effect Jan. 1, as part of the agency’s 2026 Hospital Outpatient Prospective Payment System rule. Among the most notable changes, CMS will raise hospital outpatient payment rates by 2.6% for hospitals that meet quality reporting requirements. The update includes a 3.3% market basket increase, offset by a 0.7 percentage-point productivity cut.
CMS is also phasing out its inpatient-only list over a three-year period and expanding the list of procedures covered in ambulatory surgical centers. In 2026, 285 mostly musculoskeletal procedures will be removed from the inpatient-only list, while 289 procedures will be added to the ASC covered list. The change will mark a dramatic acceleration of surgical care to outpatient settings.
At the same time, CMS will begin aligning payment rates for select outpatient services delivered in hospital outpatient departments and off-campus sites to reduce patient cost-sharing tied to care location.
Hospitals will also face new price transparency requirements in 2026. Starting Jan. 1, they must post actual, consumer-friendly prices — rather than just estimates — in standardized formats. New machine-readable file requirements include disclosing the median, 10th percentile and 90th percentile of allowed amounts, as well as naming an executive responsible for data accuracy. Enforcement of some pricing elements will be delayed until April 1.
Medicare physician payment updates: For 2026, CMS finalized a 2.5% one-time increase to the Medicare physician fee schedule conversion factor, as required under the One Big Beautiful Bill Act. Combined with other technical adjustments, this brings the conversion factor to $33.57 for clinicians participating in advanced alternative payment models and $33.40 for non-participating providers. CMS also finalized a negative 2.5% “efficiency adjustment” that reduces payment for non-time-based services expected to gain efficiency over time, sparing time-based services such as evaluation and management, care management and behavioral health.
Healthcare organizations and physician groups have raised concerns that the efficiency adjustment could unfairly reduce payments for specialties such as radiology, oncology and surgery, without sufficient empirical support. The American Medical Association and other groups welcomed the one-time pay boost, though warned it doesn’t offset long-term financial pressures on private practices. The American Medical Group Association urged CMS and Congress to pursue more sustainable, inflation-sensitive reforms to the physician payment system.
CMS’ TEAM model: CMS will begin implementing the Transforming Episode Accountability Model Jan. 1. More than 700 hospitals will participate in the model, which will hold them responsible for care quality and costs associated with five surgical procedures for 30 days after discharge. The five procedures included in the model are: coronary artery bypass graft surgery; lower extremity joint replacement; major bowel procedure; surgical hip and/or femur fracture; and spinal fusion.
Hospitals will continue to bill Medicare as usual during the performance year. CMS will then reconcile actual spending against a set target price and either issue a payment to hospitals that comes in under target or requires repayment from those that exceed it. The model will test whether episode-based payments can improve care quality while reducing Medicare expenditures, according to CMS.
To prepare, many participating hospitals are working to strengthen partnerships with post-acute care providers and develop standardized care pathways to eliminate unnecessary variation in care.
Medicare laboratory testing cuts: CMS plans to implement up to 15% reductions to Medicare payments for about 800 clinical laboratory tests, effective Jan. 31. The update stems from a 2014 law that requires Medicare to base payment rate updates in the Clinical Laboratory Fee Schedule on private payer data reported by laboratories.
The American Clinical Laboratory Association is lobbying Congress to pass the Reforming and Enhancing Sustainable Updates to Laboratory Testing Services Act, which would overhaul how Medicare sets payment rates for lab tests. ACLA — a national trade association representing clinical laboratories — includes members such as Labcorp, Quest Diagnostics and Mayo Clinic Laboratories.
CMS obstetric care standards take effect: Beginning Jan. 1, hospitals and critical access hospitals that offer obstetrical services must comply with new Medicare conditions of participation intended to standardize and improve maternal care. Under the updated CMS rule, obstetrical services must be well organized and delivered in line with nationally recognized standards for both physical and behavioral health needs of pregnant, birthing and postpartum patients. If outpatient obstetrical care is offered, its quality must be consistent with inpatient care and tailored to the scope and complexity of services provided.
CMS outlined new requirements for how obstetrical services are staffed and delivered. Labor and delivery areas must be supervised by a qualified professional, such as a registered nurse, certified nurse midwife, nurse practitioner, physician assistant or physician. Obstetrical privileges must be clearly defined for all practitioners based on competency. Facilities must also maintain key equipment on-site — including a call-in system, cardiac monitor and fetal monitor — and have protocols and supplies in place for managing obstetrical emergencies and complications, in accordance with national guidelines and internal quality improvement programs. The final phase of the rule takes effect Jan. 1, 2027, and focuses on staff training.
Medicare Drug Pricing Updates
340B rebate pilot paused amid legal challenge: A major overhaul of the 340B program was set to take effect Jan. 1, though its implementation is on pause following a federal judge’s recent ruling.
The Health Resources and Services Administration initially shared plans for a new pilot model in July. Under the proposal, drugmakers participating in the Medicare Drug Price Negotiation Program would have the option to replace the program’s longstanding upfront discount structure with a rebate-based approach. Covered entities would purchase drugs at full price and seek post-sale rebates to reach 340B ceiling prices. HRSA said the pilot would initially be limited to 10 drugs selected for price negotiations, with the option to include additional drugs after the first year.
The American Hospital Association, the Maine Hospital Association and four safety-net hospitals challenged the model in court, arguing it was finalized without appropriate notice-and-comment rulemaking. On Dec. 18, U.S. District Judge Lance Walker granted a temporary restraining order halting the pilot’s implementation while the case proceeds.
Hospital groups have been urging HHS to abandon the pilot for months, warning it would shift significant financial and administrative risk onto safety-net providers already experiencing significant financial strain. The AHA has warned the change could leave hospitals with “hundreds of millions” in annual costs.
HHS has also faced pressure from lawmakers surrounding the pilot. In September, a group of 162 bipartisan members of Congress sent a letter to HHS Secretary Robert F. Kennedy Jr. warning the model could drive up costs for safety-net providers.
Medicare Part D negotiated prices: Beginning Jan. 1 Medicare will implement its first round of negotiated drug prices under the Inflation Reduction Act, marking a shift in how the federal government pays for prescription drugs. The initial round of Part D price negotiations applies to 10 high-cost, high-use drugs. CMS projects that this will save $1.5 billion in annual out-of-pocket costs for Medicare beneficiaries while saving the program $6 billion per year.
The 10 Part D drugs selected for 2026 are Eliquis, Jardiance, Xarelto, Januvia, Farxiga, Entresto, Enbrel, Imbruvica, Stelara and NovoLog/Fiasp. The drugs treat conditions such as diabetes, heart failure, cancer, blood clots and autoimmune diseases.
Changes to Part D out-of-pocket threshold: Beginning Jan. 1 Medicare beneficiaries enrolled in Part D will see a $2,100 annual cap on out-of-pocket prescription drug costs. This cap applies to deductibles, coinsurance and copays, and once a beneficiary hits the threshold, they will owe no further cost-sharing for covered drugs for the rest of the year. The $2,100 cap follows the program’s initial $2,000 limit set for 2025 and is subject to annual adjustments based on drug spending trends.
Medicare Advantage
CMS tightens Medicare Advantage prior authorization rules: Starting Jan. 1 CMS will enact Medicare Advantage and Part D policy changes under the 2026 final rule to help strengthen prior authorization protections, improve transparency and clarify appeals and coverage determinations. Medicare Advantage plans will be restricted from reopening previously approved inpatient hospital admissions under the rule, except in cases of clear error or fraud, which will require plans to honor prior authorization decisions once granted.
CMS will also close Medicare Advantage appeals loopholes through clarifying that organization determinations include coverage decisions made before, during or after services are rendered, making sure that beneficiaries retain full appeal rights. Plans will be required to inform enrollees and providers of coverage decisions when providers submit requests on a patient’s behalf, and enrollee liability for services cannot be determined until a plan makes a payment decision on a provider’s claim.
Added policies effective in 2026 feature new guardrails on special supplemental benefits for chronically ill patients, codifying a list of non-allowable benefits and technical updates to risk adjustment data submission requirements for Medicare Advantage, cost plans and PACE organizations.
Prior Authorization
CMS final rule tightens prior authorization decision deadlines: Starting in 2026, CMS will implement key provisions of the Interoperability and Prior Authorization Final Rule to help modernize prior authorization and reduce administrative burden. Impacted payers, including Medicare Advantage organizations, Medicaid and CHIP programs, Medicaid managed care plans and CHIP managed care entities, must issue prior authorization decisions within 72 hours for expedited requests and seven calendar days for standard requests, significantly shortening current timelines.
Payers will need to provide specific reasons for prior authorization denials and report prior authorization metrics publicly, increasing accountability and transparency. Beginning Jan. 1, 2027, the rule will also require impacted payers to implement an HL7 FHIR-based Prior Authorization API to support electronic, end-to-end prior authorization to streamline workflows, reduce manual processes and minimize delays in patient care.
CMS to launch WISeR model: CMS will kick off its Wasteful and Inappropriate Service Reduction (WISeR) Model on Jan. 1, a six-year Innovation Center initiative designed to cut back on medically unnecessary care in traditional Medicare and protect federal spending. The pilot will take place in New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington state. The voluntary model will run through Dec. 31, 2031, and will test if enhanced technologies, like artificial intelligence and machine learning, can streamline prior authorization and medical review for certain items and services that are vulnerable to fraud, waste, abuse or inappropriate use.
Participating companies with expertise in prior authorization will run in assigned states and support medical reviewers in assessing specific outpatient services with current Medicare coverage criteria, like skin and tissue substitutes, electrical nerve stimulators and knee arthroscopy for knee osteoarthritis under the model. Inpatient-only services, emergency services and services that could result in significant risk if delayed are excluded. All non-payment determinations will be made by appropriately licensed clinicians who use standardized, transparent and evidence-based processes.
The WISeR Model does not change Medicare coverage or payment policies. It applies to only traditional Medicare, not Medicare Advantage. Providers and suppliers in certain regions can choose to submit prior authorization requests for included services or move forward with pre-payment medical review. Model participants will be paid based on their ability to cut unnecessary or non-covered services, with performance tracked across process quality, provider and beneficiary experience and clinical quality outcomes.
Notable state measures taking effect in 2026
Arkansas
Judge blocks PBM pharmacy ownership ban: In April, Arkansas Gov. Sarah Huckabee Sanders signed the nation’s first law to ban pharmacy benefit managers from owning or operating pharmacies in the state. The law was originally set to take effect Jan. 1, but a federal judge granted a preliminary injunction in July, blocking the law’s enforcement as court proceedings continue. CVS Caremark and Cigna’s Express Scripts — two of the nation’s largest PBMs — had sued Arkansas over the law. CVS previously said the new restrictions would force it to close 23 of its retail pharmacies in the state.
California
Capping insulin copayments at $35 per month: California became the 29th state to cap insulin copayments at $35 for a 30-day supply under private state-regulated health plans, following Gov. Gavin Newsom’s signing of Senate Bill 40. The law will require large group insurers to implement the cap, starting Jan. 1, while individual or small group insurers need to comply by Jan. 1, 2027, ensuring at least one insulin option per drug type is included on prescription formularies. The legislation tackles an affordability issue for California’s around 3.5 million adults with diabetes, with many forced to ration their lifesaving medication due to cost.
Restricting pharmacy benefit manager practices: California will prohibit PBMs from using spread pricing, effective Jan. 1 charging plans more for drugs than PBMs pay pharmacies, and any spread-pricing authorizations in contracts become void by Jan. 1, 2029. The law requires PBMs to use a passthrough pricing model and generally limits PBM compensation to flat management fees and not tied to drug prices. PBMs may not discriminate against nonaffiliated pharmacies or require patients to only use affiliated pharmacies when nonaffiliated options are in-network. Patient cost-sharing will be capped at no more than the actual rate paid by the plan or insurer for prescription drugs, with limited exceptions.
Enacting AI chatbot safety law: On Jan. 1, California will regulate “companion” AI chatbots under Senate Bill 243, signed by Mr. Newsom. The law applies to emotionally responsive, human-like chatbots designed to meet users’ social needs. It requires clear disclosures that users are interacting with artificial intelligence, with additional protections for minors, including recurring break reminders and limits on sexually explicit content involving minors. Operators must maintain and publish protocols to prevent suicide and self-harm content and provide crisis referrals when users express suicidal ideation. Beginning July 1, 2027, operators must submit annual reports to the Office of Suicide Prevention on suicide-related safety measures. The law allows any person who suffers injury in fact from noncompliance to bring a civil action.
AI tools barred from implying licensed human healthcare services: On Jan. 1, Assembly Bill 489 will extend California’s existing prohibitions on misleading use of licensed healthcare titles so they can be enforced against developers and deployers of artificial intelligence and generative AI systems that use those titles in their advertising or functionality. The law prohibits AI tools from using titles, terms or phrases that falsely suggest healthcare advice, care, reports or assessments are being provided by a licensed human health professional. Violations are enforceable by the appropriate healthcare licensing boards, with each improper use treated as a separate offense.
Connecticut
Insurers must cover biomarker testing: Starting Jan. 1, individual and group health insurance plans will be required to cover biomarker tests for diagnosing, treating, or monitoring conditions such as cancer and Alzheimer’s disease. Gov. Ned Lamont signed the legislation in June, aiming to expand residents’ access to early detection tools. The law builds on a 2024 policy that only applied to Medicaid enrollees. The mandate requires coverage through in-network labs if the test is supported by clinical evidence.
District of Columbia
Tightened Medicaid eligibility: D.C.’s fiscal year 2026 budget tightens Medicaid income eligibility requirements for childless adults and adult caregivers. Residents who no longer qualify will be transitioned to a D.C.-administered Basic Health Plan, which does not cover some Medicaid benefits such as adult dental and vision services.
Ambulance fee cap increase: D.C. is increasing ambulance transport fees, with costs primarily falling on insurers rather than patients. The fee for patients on life support rises from $1,750 to $2,000, while ground transport mileage rates increase from $26.25 to $30 per loaded mile. Insurance covers ambulance bills in most cases, with the fees helping to offset taxes that fund EMS services.
Illinois
Menopause therapy coverage mandate: Most state-regulated health plans will be required to cover medically necessary hormonal and non-hormonal therapies for menopausal symptoms. The mandate applies to plans issued, amended, delivered or renewed on or after Jan. 1, 2026. Coverage must align with evidence-based recommendations and clinical guidance supporting the therapy.
Hospital “sensitive locations” immigrant protections implementation deadline: General acute care hospitals must implement policies guiding interactions with immigration and law enforcement agents. The requirement stems from a state law aimed at designating hospitals as “sensitive locations” to protect immigrant patients. Hospitals must ensure staff understand and follow procedures that safeguard patient rights during such encounters. Hospitals would be fined $500 per day for noncompliance if they fail to meet the deadlines for developing their policies during the first quarter of 2026.
Florida
Refund of patient overpayments: Healthcare providers will be required to refund patient overpayments within 30 days of identifying that an overpayment occurred. The law aims to streamline billing practices and ensure timely reimbursements to patients. Providers must have processes in place to accurately identify and process overpayments. Failure to comply with the 30-day window could result in regulatory penalties or patient complaints.
Maryland
No prior auth required for pediatric transfers: A new law will take effect prohibiting insurers, Medicaid managed care organizations and the Maryland Children’s Health Program from requiring prior authorization for transfers to “special pediatric hospitals.” These facilities provide nonacute medical, rehabilitation, therapy and palliative care to individuals under age 22 or up to age 23 if they have co-occurring physical and behavioral health conditions. The law aims to reduce delays in medically necessary transfers for children with complex needs.
No anesthesia time limits: A new law prohibits insurers from imposing time limits on anesthesia coverage when a medical professional recommends it. If an insurer agrees to cover anesthesia, coverage must extend for the entire procedure. The law applies to the Maryland Medical Assistance Program, managed care organizations, nonprofit health plans and health maintenance organizations.
New York
Essential plan coverage restrictions: Approximately 450,000 lawfully present immigrants enrolled in New York’s Essential Plan will lose coverage starting in July 2026 due to eligibility restrictions under OBBBA. The Essential Plan currently serves 1.6 million residents.
Virginia
Expanded cancer screening coverage requirements: Two new laws expand insurance coverage for cancer screenings. Under HB 1828, insurers must cover diagnostic and follow-up breast examinations, including mammograms, MRIs and ultrasounds, at no cost to patients. SB 1314 requires coverage for updated prostate cancer screening tests for men over 50, as well as high-risk men starting at age 40.
