Listen to the audio summary of the August 2025 Compliance in Motion!
District Court Temporarily Blocks Arkansas Law Prohibiting PBMs from Owning Pharmacies
On July 28, 2025, the US District Court for the Eastern District of Arkansas temporarily blocked the new Arkansas law that would prohibit pharmacy benefit managers (PBMs) from having an ownership interest in retail pharmacies operating in the state.
WHO THIS APPLIES TO:
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Employers with prescription drug benefits covering prescriptions filled in retail or mail order pharmacies located in Arkansas.
The Court reasoned that the law “likely violates the Commerce Clause and it is likely preempted by TRICARE.” The judge stated the law “appears to overtly discriminate against plaintiffs as out-of-state companies, and the state has failed to show that it has no other means to advance its interests.”
As a result, a preliminary injunction was granted to halt enforcement of the law on its scheduled January 1, 2026 effective date until disposition of this case is finalized.
Practical Impact to Employers:
Employers do not need to take action at this time but may want to analyze how many plan participants access pharmacies in Arkansas owned by a PBM, including specialty pharmacies and mail order pharmacies. This law could have caused some pharmacies to lose their license to operate in AR starting in 2026. This could have caused disruption to employee pharmacy accessibility until the ownership of certain retail pharmacy structures changed, in which case employers sponsoring benefits may have wanted to analyze the potential impact of pharmacy closures to plan participants and make necessary accommodations. However, this injunction means licenses cannot be suspended or revoked under this law’s requirements until the merits of this case are settled.
GO DEEPER:
Law link
Affordability Percentage Increased for Plan Years Beginning in 2026
On July 18, 2025, the IRS announced a 9.96% affordability percentage for plan years starting in 2026 (up from 9.02% for 2025). This increase is due to a change in the indexing methodology.
WHO THIS APPLIES TO:
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Applicable large employers (ALEs) with 50+ full-time and equivalent employees.
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Any fully-insured or self-funded medical plan that provides minimum value, or the ALE’s individual coverage HRA (ICHRA), must be analyzed for affordability.
Affordability is determined for the lowest-cost single medical plan providing minimum value.
Safe Harbors:
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Federal Poverty Level (FPL)
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Rate of Pay
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W-2
Example: Using FPL, a 2026 calendar year plan will be affordable at $129.89/month ($16.69 more than 2025).
GO DEEPER:
IRS link
Practical Impact to Employers:
Employers must design premium contributions properly before the plan’s start date. While affordability percentages rise, penalties for unaffordable offers also increase.
Table of affordability:
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2024: 8.39% – $101.93 (FPL affordable plan)
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2025: 9.02% – $113.20
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2026: 9.96% – $129.89
ALE Penalties Increased for 2026
On July 22, 2025, the IRS announced ALE penalties increase over 15% for 2026.
Corrected Penalties:
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§4980H(a): $3,340 annually / $278.33 monthly
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§4980H(b): $5,010 annually / $417.50 monthly
GO DEEPER:
IRS link
Practical Impact:
Employers must track full-time status carefully and ensure affordability. Penalty exposure is higher than ever.
Benefit Provisions in the Budget Reconciliation Bill Signed into Law
On July 4, 2025, President Trump signed a major budget reconciliation bill into law.
Key provisions:
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Permanent HSA compatibility with:
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2025: Low/no-cost telehealth (retroactive to Jan 1, 2025).
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2026: Direct Primary Care (DPC), with cost/service limits.
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2026: Bronze or Catastrophic Exchange plans.
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Expanded Tax Credits:
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Paid family/medical leave (2026).
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Employer-provided child care (2026).
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Dependent Daycare FSA Cap: Raised to $7,500 in 2026 (not indexed).
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Education Assistance:
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Student loan repayments permanently allowed starting 2026.
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$5,250 annual limit indexed beginning 2027.
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New Benefit: Trump Accounts (tax-favored retirement accounts for dependents/employees under 18).
GO DEEPER:
Bill text
Practical Impact:
Employers may need to amend plan documents, adjust FSA allowances, and consider compliance with ERISA, ACA, and COBRA for DPC offerings.
Question of the Month: Direct Primary Care (DPC)
With DPC becoming HSA-compatible in 2026, employers must weigh compliance obligations:
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DPC creates a group health plan (ACA, COBRA, ERISA apply).
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Requires plan documents, SBC inclusion, and compliance with PCORI, MHPAEA, RxDC, GCPCA.
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Must respect cost caps ($150 single / $300 family).
Alternative: Increase HSA contributions and encourage employees to seek individual DPC.