AWFS is a client of LobbyIt. Each month, LobbyIt prepares the following report on public policy updates and activity for AWFS and its member companies.
AWFS Monthly Report
Greetings!
In the month of March, the Lobbyit team worked to build a new strategy for the remainder of 2018 for AWFS.
Advocacy Activity
After striking a deal on what the spending levels should be, Congress was busy in the month of March with negotiations on how much would be spent on the budget deal that was struck for FY18. Rather than passing individual authorizing bills, Congress worked on and passed what is called an Omnibus, which included the authority for all of FY18’s spending.
The President was very unhappy with the size of the bill but by the time he voiced his displeasure Congress had left town and negotiations were completed. He ended up signing one of the largest spending bills in recent history, with increases to the military and domestic spending. Except for those concerned with the fiscal implications of the bill, many in Congress were happy as the Omnibus ended up with spending for many Member’s pet programs.
March also consisted of many nomination hearings. With some of the changes in the Administration, the Senate’s time is being consumed by nominations. This will put increased pressure around those bills that are voted on and just means that the coming months will likely be busier on the Hill than they normally would be in an election year
In the aftermath of the February Hill Day, we worked to identify the best next steps. This involved conversations with the AWFS staff to determine whether there would be a shift in advocacy priorities for the organization. In light of these conversations, we determined that we needed additional information from DOL. So, we scheduled another meeting with the staff at DOL for the month of April. Additionally, we continued monitoring developments on the association health plan front. Currently, we anticipate the final rule to be announced this summer. After taking a beat to analyze the results from the Hill day, we anticipate gaining a lot of new data in April that will enable AWFS to determine how to best address the workforce development issues facing the industry.
Legislative & Regulatory Updates
Senate Pitchman for Association Health Plans Talks Next Steps A well-connected Senate champion of the Labor Department’s effort to expand association health plans is optimistic the rule will be out in about a month.
Sen. Rand Paul (R-Ky.) told Bloomberg Law he’s talked to both Labor Secretary Alexander Acosta and White House staff recently about the rulemaking. He said the administration wants to move full speed ahead to implement this rule change, allowing small businesses to join together to offer workers a more reasonable alternative to the Obamacare individual marketplace.
“My understanding is that it will be finalized hopefully in the next month or so and that by fall, individuals will be able to join associations to buy insurance,” Paul said in an April 11 interview.
The senator also said he’s been working with many potential associations to ensure they’re prepared the moment the rule drops to structure their plans in accordance with the regulatory parameters. “We’ve had meetings with dozens of different groups that are very interested,” Paul said.
Once finalized, the rule will expand access to health plans formed by associations by changing the definition of “employer” to allow more small businesses, including self-employed individuals, to form health plans on the basis of industry or geography.
The proposed version wouldn’t require the plans to cover the essential health benefits mandated by the Affordable Care Act, leading to concerns that the new association health plans would provide skimpy coverage.
Leading Voice on Hill
The Kentucky senator, a one-time ophthalmologist, has been perhaps the loudest voice on Capitol Hill supporting this regulation. Paul urged the Trump administration at an early stage to issue an executive order that directed the DOL rule, and he pressed Acosta to get to work on the matter during his Senate confirmation hearing in March 2017.
“They talk about people going up 25 percent a year in premiums” in the individual marketplace, Paul told Bloomberg Law. “We’re going to give those people an exit ramp. They’re going to be able to get group insurance,” he said.
However, some Democrats and health policy gurus have strongly opposed the rule. They say it will lure healthy people away from the Affordable Care Act marketplace, leaving a sicker population that could drive up marketplaces costs or force insurers to exit.
Paul said he thinks the labor secretary shares his optimism that the rule can be released within a month. This would be an accelerated timeline considering the public comment period on the proposed version just ended in March.
States Want to Keep Control Over Association Health Plans
Twenty-three states and the District of Columbia weighed in on the Labor Department proposed rule on association health plans and one theme is clear: The states don’t want their toes stepped on.
Alaska, Iowa, Massachusetts, Montana, and other states have worked to regulate association health plans and multiple employer welfare arrangements over the years to curb fraud and mismanagement. A number of the states commenting on the rule either endorsed it, or expressed optimism about the prospect of broadening access to health coverage, while some just asked the DOL to pull the rule. Regardless of where they stand on the rule, states are concerned the DOL proposal doesn’t explicitly say they’ll retain regulatory authority over certain types of associations.
The DOL and the states discovered 144 unauthorized entities marketing insurance products in all 50 states from 2000 through 2002, according to the latest national dataavailable. The insurance was sold to at least 15,000 employers and covered more than 200,000 people, according to the 2004 Government Accountability Office report. All told, these entities failed to pay $252 million in medical claims over those two years and state insurance regulators were only able to recover some of the money. Some of the entities operated in more than one state and some operated under different names.
The DOL’s proposed rule on association health plans would make it easier for individuals and employers in the same industry or geography to band together to form their own health plan. The DOL proposed the rule after President Donald Trump asked it to consider revising the rules for association health plans in an October 2017 executive order. Supporters tout the rule as a way to give small businesses and individuals access to affordable health care. Skeptics think it could bring back fraudulent health arrangements.
“I think the feeling is that the states do a better job of regulating them than the feds do,” J.P. Wieske, deputy commissioner of insurance in Wisconsin, told Bloomberg Law. For one thing, states can strike a balance between offering broader coverage and the appropriate level of regulation, he said.
On-the-Ground Regulation
MEWAs (Multiple Employer Welfare Arrangement) often have solvency issues, something that states can be in a better position to address given their regulatory authority over the plans. Several states questioned whether the DOL would have the capacity to regulate all associations and penalize any bad actors. Wisconsin’s Wieske said states governing these plans know the warning signs that could signal that a MEWA is having money problems, and the DOL may not recognize that as quickly.
MEWAs are often associated with being on the wrong side of the law, but even well-intentioned MEWAs that think they can cover benefits run into funding problems, Jessica K. Altman, acting commissioner for the Pennsylvania Department of Insurance, told Bloomberg Law. Some of these plans ran out of money because they didn’t want to raise prices on people, she said.
States have the experience regulating these plans and it’s important the DOL make it “clear that we have all of the authority to do the job we do every day,” she said. The proposed rule has garnered 720 unique letters and two petitions. The DOL hasn’t scheduled hearings on the rule, but it often does in situations where a proposal attracts many comments.
Changes at OSHA on Enforcement and Cooperation
Companies in some regions could see fewer workplace health inspections and a respite from Obama-era health regulations in the coming year, as the Trump administration continues its business-friendly regulatory path. At the federal level, OSHA is signaling that it wants to work less punitively with businesses and engage in a more cooperative relationship with employers rather than pursuing enforcement.
Limited by budget and time constraints, OSHA may find it easier to perform repetitive, simpler tasks instead of the more complicated ones like health probes. The agency says it wants to use strong, deterrent strategies, for employers who flout federal law and provide compliance assistance with the goal of helping all employers improve safety and health performance.
Under this plan, the agency wants to expand the Voluntary Protection Program–which exempts employers from safety inspections if they can prove compliance–and reach problem employers by partnering them with other companies with better safety records.
Overtime Threshold Will Rise to Mid-30,000s, Attorneys Say
The annual wage threshold below which employers must pay employees overtime may rise to the mid-$30,000s, employment attorneys say.
When exactly this will happen and what the threshold will be precisely are anyone’s guess, because the matter has been such a political football. But when it does happen, it will affect employers in all industries, and they should prepare now by auditing to ensure that all their employees are properly classified as exempt or nonexempt from receiving overtime, attorneys say.
The Department of Labor’s Wage and Hour Division last set the threshold at $455 a week ($23,660 a year) in 2004. The Obama administration finalized a rule to raise that to $913 a week ($47,476 a year) as of Dec. 1, 2016, but that change was blocked by Judge Amos Mazzant in the U.S. District Court for the Eastern District of Texas.
The Labor Department appealed the ruling to the U.S. Court of Appeals for the Fifth Circuit, and that appeal is still pending, although it has been stayed, Tammy D. McCutchen said March 12 at the Society for Human Resource Management’s Employment Law & Legislative Conference in Washington. McCutchen was Wage and Hour administrator when the threshold was raised in 2004.
Most employer comments to a July 2017 DOL “request for information” on the possibility of changing the overtime rule favor a more modest raise, and no change to the “duties test” that defines those with certain supervisory and other positions as automatically exempt, said McCutchen, who is now a principal at employer-side law firm Littler Mendelson.
She said that under the method she used in 2004, the threshold would currently be adjusted to $612 per week, $31,824 annualized. If the threshold were adjusted by inflation, it would rise to $588 per week, $30,576 annualized. She added that it seems that WHD eventually will raise the threshold over time to the mid-30s.
Others agree. “Prepare for an increase in the mid-30s. That is the range that is telegraphed right now. Be prepared for that in terms of budgeting,” Jonathan R. Sigel, a partner at Mirick O’Connell, DeMallie & Lougee LLP in Westborough, Massachusetts, told Bloomberg Law.
Until next month,
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