Everything You Need to Know About State-Mandated Defrayal in 2025

In today’s episode of Regulatory Joe, we’re discussing state-mandated benefit defrayal and potential changes on the horizon for 2025 and beyond. 

State-mandated benefit defrayal allows states to control the cost of benefits that health plans offer within any marketplace. This primarily applies to qualified health plans (QHPs) certified on-exchange. By mandating health plans to cover more of the benefit costs, state can alleviate the financial burden on members. 

Since the Affordable Care Act was passed in 2010 and implemented starting in 2014, all plans must cover ten federal essential health benefits (EHBs), including emergency services, hospitalization and prescription drugs. 

States have the ability to add additional EHBs, giving them more control over additional healthcare benefits. For example, Nevada has recently implemented policy language requiring different drug pricing structures for on-exchange QHPs, set to take effect in 2026. 

What’s Changing? 

The Centers for Medicare & Medicaid Services (CMS) proposes that state-mandated  benefits, which are already included in a state’s EHB benchmark plan, would not be considered as “additional to EHB” under CMS’ defrayal policy. 

This means that anyone filing needs to now newly check a specific tab of their plan and benefit template when filing with a state to review the “EHB Table” – and there is a fillable field on the template that indicates if a benefit is in “addition” to an EHB. 

While this is a simple checkbox – once it is clicked it drives forward how these benefits will be paid to members when they enroll into the plan. If that is missed, health plans will face additional challenges and have to reprocess claims. 

This is an overall win for members, as they will receive increased access to affordable healthcare, but health plans must find a way to cover these additional costs. This involves adjusting rates and pricing before filing, which comes with challenges. 

Regulatory Joe’s Recommendations 

  • Monitor Regulatory Changes 
    Keep an eye on state divisions of insurance for the states your plan files in for new policies and prepare your team for pricing, rating and operational implications. 
  • Objections and Trends 
    Pay close attention to objections and benefit deficiencies noted by regulators. These insights can help identify common themes and areas for improvement in benefit strategies. 
  • Ensure Benefit Package Accuracy 
    Ensure your benefit packages are accurately filled out, with special attention to the EHB sections. Specifically check the bottom left corner of your Excel sheets where EHBs are listed, ensuring all fields are filled out correctly based on your states’ healthcare policies. 
  • Run Nondiscrimination Tools 
    Use CMS’ nondiscrimination tools to validate your plan templates before and after submission to ensure compliance. This helps identify any potential issues that could lead to non-compliance and allows for corrections before final submission. 
  • Action Plans for Filing Changes 
    Establish an action plan for reopening filings or completing amendments if defrayal changes occur post-submission. Coordinate with all relevant departments, including legal, marketing, and product teams, to ensure that updates are consistently implemented across all documents and communications. This includes preparing a timeline for action and ensuring all dependent documents are updated. 
  • Keep Members Up-to-Date 
    For significant benefit changes, it is crucial to prepare communications plans to inform your members promptly. Ensure that your legal and marketing teams are aligned to manage these communications effectively. 

State-mandated benefit defrayal is certainly here to stay and will likely become more prevalent in the marketplace. Health plans need to stay proactive, informed and prepared for these changes to ensure compliance and member satisfaction. 

Be sure to watch the full episode for a more detailed run-down of changes and recommendations.  

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