Power to Choose: How State-Level Health Regulations Are Restoring Patient Choice — and Raising Community Health

Across the country, states are quietly reshaping the rules that govern where patients get their medicines, who can treat them remotely, and how health dollars flow between insurers, pharmacy benefit managers (PBMs), providers and pharmacies. Those changes aren’t just regulatory bookkeeping. They’re a practical rebalancing of power — away from opaque middlemen and toward patients, neighborhood pharmacies, independent clinics and community hospitals. If done right, these reforms expand patient choice, strengthen local health infrastructure, and improve outcomes and satisfaction. If done poorly, they can create legal fights and unintended cost shifts. Both outcomes are already visible in the states that have moved first. (NASHP)

Why choice matters

Choice in healthcare isn’t a luxury — it’s a public-health tool. When patients can pick a nearby independent pharmacy or a community clinic, they’re more likely to fill prescriptions, complete follow-up care, and adhere to treatment plans. Local providers know local patients: they understand transportation barriers, language needs, insurance quirks, and the social drivers that shape health. Policies that protect and expand that choice therefore translate directly into better access and better continuity of care.

What states are changing — and why

Several state policy threads have converged to restore breathing room for patients and smaller providers:

• PBM transparency and anti-steering rules. Over the past few years nearly every state has passed at least some PBM regulations: transparency mandates, audit standards, price-reporting, and limits on PBM ownership of pharmacies or automatic “steering” to PBM-owned mail-order chains. These laws aim to stop practices that can steer patients away from the pharmacy they prefer or make local pharmacies economically unviable. Advocates argue these rules protect competition and preserve local access; opponents warn of litigation and cost-shifting. (NASHP)
• Limits on site-of-care price distortions (site-neutral payments). States and the federal government are taking steps to level payment differences that rewarded certain hospital outpatient settings over community physician offices. Aligning payments reduces the incentive to shift care to higher-cost sites solely for higher reimbursement, which can limit patient choice and raise out-of-pocket costs. (KFF)
• Interstate licensure compacts & telehealth simplification. Telehealth is here to stay, but licensing rules have historically tied providers to the patient’s state. Where states join licensure compacts or adopt streamlined registration, patients — especially in rural and underserved areas — get broader access to specialists and continuity with providers across state lines. Compacts are a sensible middle path: they preserve state oversight while easing cross-state practice. (telehealth.hhs.gov)

Concrete benefits for communities and businesses

1. Stronger local pharmacies and clinics. Anti-steering rules and stricter PBM audits help independent pharmacies survive. That matters in rural and low-income urban neighborhoods where the local pharmacy can be a healthcare hub — offering immunizations, medication reviews and chronic disease counseling. Preserving local pharmacies keeps care close and supports small-business employment. (NASHP)
2. Lower barriers to specialty and follow-up care. Telehealth compacts and streamlined licensing let specialists extend care beyond metropolitan centers. For patients, that means faster access to secondary opinions and reduced travel burden — both drivers of better adherence and outcomes. (telehealth.hhs.gov)
3. More transparent markets, better contracting. Transparency requirements force clearer contracting between PBMs, insurers and pharmacies. When payers and employers can see spread pricing, rebate flows and dispensing reimbursements, markets correct toward value rather than opacity. That can improve negotiation leverage for plans and reduce perverse incentives that hurt patients. (NCSL)
4. Patient-centered cost control (not profit protection masquerading as policy). Site-neutral payments are an attempt to control costs by paying fairly for the same service regardless of where it’s delivered. This reduces the chance that patients are shunted to more expensive settings for financial — not clinical — reasons. Over time, that can lower premiums and out-of-pocket costs while preserving patient choice. (KFF)

The trade-offs and legal fights

Change brings friction. PBM reforms have produced lawsuits and aggressive legal challenges from industry groups arguing preemption and commerce-clause concerns; states have also faced pushback from employers worried about increased costs. Recent litigation in states like Iowa highlights how regulatory reform can trigger fast and consequential court battles that slow implementation and increase uncertainty for employers and insurers. Policymakers should design reforms with clear legal grounding and guardrails to limit blowback and unintended cost-shifts. (Reuters)

Principles for smarter state policy

States that truly want to expand patient choice while protecting affordability should consider a few design principles:

1. Transparency first. Require clear reporting of rebates, spread pricing, and related PBM revenue streams so distortions can be identified and corrected. Evidence beats rhetoric.
2. Protect choice, measure cost. Anti-steering protections should be coupled with monitoring of total system costs and patient out-of-pocket impacts to ensure protections for choice don’t cause undue cost spikes.
3. Support local capacity. Invest a portion of savings (or create transition grants) to help independent pharmacies and community clinics expand services that reduce hospital utilization — medication therapy management, home visits, community outreach.
4. Harmonize licensure for telehealth. Expand compact participation and simplify temporary registration models to increase provider mobility while preserving patient safety through state oversight.
5. Build evaluation into law. Sunset clauses, mandatory impact evaluations, and routine audits will allow states to course-correct, scale successful tweaks, and avoid long-term unintended consequences.

A pragmatic call to action

Policymakers don’t have to choose between choice and cost. They should frame reforms as tools to align incentives with patients’ needs: local access, understandable prices, and care delivered in the right place for clinical—not financial—reasons. When states combine PBM transparency, anti-steering protections, site-neutral payment policies and smarter telehealth licensure, they stitch together a system that rewards local providers, widens patient choice, and encourages competition on service and value.

We should expect a few bruising legal fights and messy rollouts — reform is rarely tidy — but the core question is simple: do we want a health system that funnels people toward the most convenient corporate channel, or one that preserves community care and gives patients the practical power to choose? If states continue on the current path of targeted, evidence-oriented reforms, the answer is increasingly clear: patient choice can be rebuilt — and with it, healthier communities and fairer markets. (NASHP)