With the midterm elections approaching, Arizona employers planning their 2027 benefits strategies should account for potential healthcare policy shifts that could influence both their own budgets and employees’ out-of-pocket expenses in the years ahead.
For businesses, the challenge is less about predicting which proposals will move into law and more about understanding how certain changes could translate to their health plans. Focusing on a few key areas now makes it easier to address post-election cost and coverage impacts as they emerge.
Three Health Policy Areas Arizona Employers Need to Watch
Medicaid funding and eligibility changes, pharmacy benefit manager reforms and out-of-network claim disputes could shape renewal costs, employee spending and the options employers have to manage their plans.
Medicaid Policy Changes Could Reach Employer Health Plans
Arizona’s Medicaid program, AHCCCS, is especially exposed to federal policy changes. Proposed funding cuts, new work requirements and stricter eligibility redeterminations aimed at reducing fraud and waste sound reasonable on paper, however, the per-unit cost of care could be driven up for everyone.
Lower reimbursement and more uninsured patients could increase financial pressure on providers, as people will still be diagnosed with cancer, involved in car accidents and present at doctors’ offices. Those costs would trickle down to employers, regardless of their benefits funding structure, as providers offset unpaid care by raising contracted rates when they renegotiate with insurance carriers.
Pharmacy Benefit Manager Reform Is Bringing Greater Scrutiny to Prescription Drug Costs
Prescription drugs are one area where employers may have more opportunities to control their health plan dollars than others.
Pharmacy benefit managers, or PBMs, negotiate prescription drug pricing and rebates on behalf of health plans. Employers’ visibility into those financial arrangements varies by contract and purchasing leverage. Smaller employers, in particular, may have limited access to detailed information about PBM compensation and how rebates are distributed.
For example, a PBM might receive a significant rebate from a drug manufacturer, but some or all of that rebate money may remain with the PBM rather than returning to the plan.
Federal reforms enacted in 2026 aimed at giving employer health plans greater visibility into those arrangements will begin applying in 2029. Among other requirements, PBMs will have to provide more detailed information about drug spending, rebates and pricing, and for certain ERISA-governed arrangements, pass rebates through to the plan. Arizona lawmakers have also considered several proposals focused on PBMs, including rebates, pharmacy ownership and patient steering (the practice of pressuring patients to use a specific pharmacy). Employers should assess how these individual proposals could affect pharmacy access, plan flexibility and total prescription drug spending.
Out-of-Network Claims Add Financial Risk for Employers
Employers face another potential source of exposure: out-of-network claims.
The No Surprises Act currently protects patients from certain unexpected out-of-network bills, but the provider still expects to be paid. If the provider and the insurance plan disagree about how much is owed, that disagreement moves behind the scenes to the health plan.
If the provider and plan cannot settle on an amount, the claim may enter the independent dispute resolution (IDR) process, where an arbitrator selects either the provider’s offer or the plan’s offer. There is no “meet in the middle” here, and the Congressional Research Service reports more than 80% side with the provider.
Arbitration awards and related fees can become a direct plan expense up to the applicable stop-loss threshold. The high volume of IDR cases and larger-than-expected awards to providers are adding as much as 1 percentage point to health benefit cost trends, according to our actuaries.
Arizona lawmakers have debated ways to place limits around the dispute process. In 2026, a proposed amendment to AZ House Bill 2211 would have treated provider offers above either 300% of the approved Medicare reimbursement rate or 300% of the qualifying payment amount as excessive fees and potentially unprofessional conduct. The larger issue goes beyond one bill, however, as policymakers continue to work towards a legislative fix to manage the impact on plan costs.
Medical plan sponsors need to closely analyze third-party out-of-network claims, as well as who manages the dispute process on their behalf and how out-of-network payments impact their overall claims costs.
How Employers Can Prepare Now
Employers do not have to wait for new policies to take effect to examine their current health benefits strategy. Clarity around current plan structure and spending patterns can position you to respond promptly without overcorrecting for proposals that may never become law.
- Start with your funding structure.
Determine how a fully insured or self-funded model will impact your organization’s claim costs, out-of-network disputes and access to pharmacy rebates.
- Assess how your pharmacy benefits are bundled.
For self-funded employers, it may be worth evaluating whether pharmacy benefits need to remain bundled with the medical carrier. If your carrier is affiliated with a PBM, unbundling allows you to work with an independent PBM that offers greater transparency into pricing and rebates.
- Let your data guide the strategy.
Look beyond the total increase in claims and ask what is actually driving it. Are providers charging more for the same services, or are employees using more care services? Determine whether rising costs are rooted in either utilization or inflation, then shape your solutions around the core issue.
The goal is to understand your own health plan well enough to recognize how scheduled policy changes and new proposals might begin affecting your costs.
The earlier employers evaluate what they have, the better prepared they will be to address changes upon renewal. If you are unsure where your organization has the greatest cost exposure or opportunity, connect with a Marsh Agency representative to review your benefits strategy and spot the areas worth addressing.
Cole Tsonis is Associate Vice President of Employee Health and Benefits at Marsh Agency Arizona.
