Health Policy in 2025: Key Updates Impacting Payers and Administrators
At A Glance
A series of pivotal health policy shifts in early 2025 are reshaping the healthcare landscape, bringing notable implications for payers, health plans, and healthcare administrators. Medicare introduced historic caps on prescription drug costs and is intensifying its scrutiny of private Medicare Advantage plans, prompting payers to reassess compliance strategies and cost structures. Simultaneously, Medicaid programs face the challenging aftermath of pandemic-era coverage, with millions losing benefits through rigorous eligibility redeterminations—even as several states move forward with Medicaid expansion, creating new opportunities and complexities for administrators navigating these shifts.
In addition, regulators are intensifying behavioral health parity enforcement, extending popular telehealth flexibilities, and proactively addressing the expanding influence of artificial intelligence and advanced technologies in healthcare delivery and administration.
Below is an executive summary highlighting the most impactful legislative and regulatory developments to date this year.
The Impact
Beginning in 2025, Medicare Part D enrollees have a new $2,000 annual cap on out-of-pocket prescription drug costs. This cap—enacted under the Inflation Reduction Act—significantly reduces financial burden for seniors with high drug spending. Health plans offering Part D coverage will need to adjust their benefit designs and premiums to accommodate the cap, which will be indexed for inflation in future years.
Source: KFF
The Centers for Medicare & Medicaid Services (CMS) is tightening oversight of Medicare Advantage (MA) and Part D plans. A newly proposed rule for Contract Year 2026 would permit coverage of weight-loss medications (reversing a prior exclusion of drugs used for obesity) and strengthen prior authorization guardrails to ensure these plans don’t create inappropriate barriers to care.
CMS is also cracking down on misleading marketing practices and requiring more transparent provider networks, including proposals to integrate up-to-date provider directories into Medicare’s Plan Finder tool, to better protect beneficiaries.
Collectively, these changes signal a stricter regulatory stance that MA organizations and insurers must prepare for in the coming years.
Source: AAMC
With the end of the COVID-19 continuous coverage requirement, states have been redetermining Medicaid eligibility, and over 25 million people have lost Medicaid coverage during the unwinding process.
Despite these disenrollments, Medicaid enrollment nationally remains about 10 million higher than pre-pandemic levels, partly due to states expanding eligibility. Notably, in late 2023 North Carolina became the 40th state to implement Medicaid expansion, adding coverage for hundreds of thousands of low-income adults.
Medicaid managed care plans are closely watching enrollment fluctuations, as CMS has extended certain redetermination flexibilities through 2025 to help states streamline renewals and reduce erroneous coverage loss.
Source: KFF
Federal regulators have enacted new rules to strengthen mental health and substance use disorder parity in insurance coverage. The Biden administration’s final Mental Health Parity rule (effective 2025) closes loopholes that allowed more restrictive treatment limits for behavioral health.
Health plans must now ensure that mental health benefits are provided on equal terms with medical/surgical benefits – for example, plans cannot impose stricter prior authorization or network criteria for therapy than they would for medical care.
The rules add protections against non-quantitative treatment limits (like excessive prior auth or step therapy requirements) and prohibit the use of biased clinical algorithms that could restrict mental health care access.
Insurers should review and adjust their utilization management policies and coverage definitions to comply, as enforcement is expected to increase in 2025.
Source: Department of Labor
Congress has acted to preserve expanded telehealth access for Medicare beneficiaries. In March 2025, lawmakers extended key telehealth waivers through at least September 30, 2025, averting a lapse in virtual care coverage.
This means Medicare patients can continue to receive telehealth services from home (with no geographic restrictions) and via audio-only visits, and face-to-face visit requirements for mental health telehealth remain suspended.
Payers and providers can confidently invest in telehealth programs this year, knowing that the pandemic-era flexibilities – including hospital-at-home programs and broader telehealth provider eligibility – will remain in place for now.
However, the extension is temporary, so the industry is advocating for more permanent telehealth legislation to provide long-term certainty.
Policymakers are increasingly addressing the role of artificial intelligence and advanced technology in healthcare. In early 2025, the FDA issued new draft guidance for AI-enabled medical devices, outlining expectations for premarket documentation, bias mitigation, and lifecycle monitoring of algorithms.
This move highlights regulators’ focus on ensuring AI tools in healthcare are safe, effective, and transparent. On the legislative front, a bipartisan bill introduced in Congress (the Healthy Technology Act of 2025, H.R. 238) proposes to allow certain FDA-approved AI systems to be legally recognized as “prescribers” of medication.
If eventually passed, this first-of-its-kind proposal would dramatically expand AI’s role in clinical decision-making – a prospect that excites some for its efficiency gains but raises concerns about patient safety and oversight. Health plans and providers will need to stay engaged with these developments, as increased regulation of digital health tools and potential new uses of AI could impact everything from care management to compliance in the near future.