In part 1 of this 3-part series, we discuss the delivery of healthcare and payment system.
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Blog Page 92
Redistricting: How Will the Courts’ Decision Impact 2018?
Courts cases related to redistricting are still pending based on maps in some states including Wisconsin, Maryland, Texas, North Carolina, Michigan, and Georgia, leaving the issue up in the air heading into the 2018 election cycle.
When a court strikes down an electoral map, the court generally provides the respective legislature and governor with an opportunity to pass a new map into law. If, however, the legislative process fails or if there is insufficient time to act, courts may order the election to occur based on a remedial map drawn by the courts. This occurred very recently in Pennsylvania in the case League of Women Voters of Pennsylvania v. Commonwealth of Pennsylvania. The legislature and governor failed to agree on a new map (i.e. failed to sign a new map into law); therefore, the court drew its own map. Elections experts have praised the maps drawn by the courts as more competitive and more fair. Republicans in Pennsylvania are likely to lose three or more seats under these maps, and therefore, have threatened to remove the justices from office asserting they have engaged in impeachable offenses by “overriding the express legislative and executive authority” to pass laws.
In Wisconsin, we are still waiting for the United States Supreme Court to decide its first partisan gerrymandering case in well over a decade. It is expected that the high court will decide Gill v. Whitford in the next few months. If the high court strikes down the maps passed in 2011 – which have been in place for many election cycles already it will be incumbent upon the governor and the Wisconsin Legislature to quickly redraw the maps before they are redrawn by the courts.
This election cycle is critical both in Wisconsin and nationwide, because it will begin to determine what the next 10 years will look like for these maps, which will be redrawn following the 2020 census. The Supreme Court’s decision to redraw the maps would undoubtedly have an impact on the 2018 elections in Wisconsin, but the exact impact will likely depend on who redraws the maps: the current Republican-controlled Wisconsin Legislature or the courts.
Feature photo credit: brennancenter.org
A Merit-Based Immigration System
The United States has been a nation of immigrants since its founding and the legal systems for immigration have changed over time. The Senate’s failure to pass legislation on Dreamers and border security last week demonstrates some of the politics and complications embedded in the issue of immigration reform and leaves great uncertainty for the future of our nation’s system.
The last sweeping reform occurred in 1965 when the United States moved away from country quotas to what’s currently in place. Supporters of what’s called a “family-based system” say it creates a support network that immigrants may thrive under, whether it is helping family members understand the American culture and assimilate faster, working in family businesses, or serving as caretakers for family members.
President Donald Trump wants to change to what’s being called “chain migration,” a merit-based, or points-based system. A merit-based system was also a central element of President George W. Bush’s 2007 immigration reform proposal. President Trump’s goal through a merit-based system is to prioritize educated, high-skilled immigrants over those with family ties and reduce the overall immigration numbers. The president believes that a merit-based system would increase wages and save taxpayer dollars, while also fostering entrepreneurship and innovation. He often refers to Canada’s and Australia’s merit-based immigration systems as examples of how it could work in the United States. While neither country admits immigrants exclusively through points, under their points-based systems various desirable selection factors have a corresponding number of points that applicants can accumulate. An applicant then needs a certain minimum number of points to qualify. Some of the factors include language skills, education, experience, age, arranged employment in the country, and adaptability. However, the merit-based systems in Canada and Australia have not prevented or resolved all challenges with securing a labor force. The Bipartisan Policy Center highlights Canada and Australia’s immigrant underemployment and unemployment after arrival, which led to both countries tweaking their systems.
While our nation can benefit in learning from the successes and failures of the merit-based systems used by Canada and Australia, a significant issue in President Trump’s merit-based proposal is that he champions high-skilled immigrants and neglects to address the “merit” of low-skilled workers. In fact, the president has largely spoken about the problems that have arisen from the influx of low-skilled workers. Many industries like construction, agriculture, and hospitality rely on low-skill jobs, but they continuously face labor shortages. Some suggest people in these roles should be incorporated into the points system or through a hybrid system that includes state or employer sponsored systems.
It is critical to address the labor needs of all industries. The U.S. needs both high-skilled and low-skilled immigrant workers to fill labor shortages and foster our nation’s economic growth.
One Year in, ACA Looks Very Different
January 2018 marked the one year anniversary of the Trump administration. President Trump’s Inauguration ushered in a wave of optimism for conservatives who wanted to repeal the Affordable Care Act (ACA), aka “Obamacare.” But a divided Senate prevented a clean Obamacare repeal from becoming reality. Since then, Congressional Republicans and the White House have worked together to unravel the ACA infrastructure.
The direct effect of these actions remains to be seen. It’s notable that 2018 enrollment is running at about 96% of the 2017 totals, even with an abbreviated open enrollment period and fewer insurers participating in individual insurance marketplaces.
Below is an outline of changes to the ACA during President Trump’s first year:
Repeal of the Individual Mandate
- The December 2017 tax reform bill repealed the individual requirement to carry health insurance. The employer mandate still exists.
- Healthcare exchanges remain in place, but no individual mandate means no incentive exists for healthy consumers to buy into a plan, which could result in an older and sicker coverage pool, driving up the cost of the plans.
- If costs soar high enough, even those who rely on health insurance might be forced out of the exchanges simply because of affordability issues. High Deductible Health Plans (HDHPs) may become more the rule than the exception.
Repeal of Cost Sharing Reduction (CSR) Payments
- CSRs were previously in place to help cover costs of care for persons under 250% of federal poverty. Under the ACA, the government reimbursed insurers for lower co-pays and deductibles for this population.
- Prior to Trump’s election, the legality of the CSRs had been challenged in federal court, with the court ruling that the payments are “illegal.” While the Obama administration had proceeded with an appeal of that court order, in October 2017, the Trump administration announced it would accept the court ruling and end all CSR payments.
- ACA insurers are still required to provide low-cost insurance options to low-income Americans. Without CSR reimbursement, the cost of qualifying “Silver” marketplace plans increased dramatically for 2018 coverage.
- In exchange for her vote on tax reform, Senator Susan Collins (R-Maine), was promised a vote on a bi-partisan bill that, among other items, would include restoration of the CSRs.
Executive Order: Expansion of Association Health Plans
- This order directs the Departments of Labor, Treasury and Health and Human Services to rewrite regulations, including:
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- Expanded use of Association Health Plans to allow more employers to pool their risk pools to avoid ACA regulation and to sell across state lines.
- It expanded use of Health Reimbursement Arrangements.
- The order allows Short-Term Limited Duration Insurance to be issued for up to one year (up from three months).
- Details of new regulations are pending, as they will be written by agencies.
- But, it won’t affect 2018 health plans; and is expected to eventually disrupt existing associations.
Funding of HealthCare.Gov
- The White House is not participating in Open Enrollment promotions.
- They cut the promotions budget by 90% and in-person outreach by 72%.
Delay of ACA taxes
- In January 2018, Congress passed a budget resolution that includes a two-year delay of the “Cadillac Tax,” the 40% tax on employers of certain health insurance plans and a two-year delay of the medical excise tax.
- Opponents of these taxes continue to advocate for their full repeal.
- Both of these taxes are sources of income for offsetting the expenses of the ACA.
For a snapshot of this year’s open enrollment numbers, see 2018 Open Enrollment Data.
Illinois: Privacy and Cybersecurity Bills
Due to the current age of technology, the Illinois General Assembly has taken up measures of cybersecurity. This will likely be an ongoing issue throughout the 100th General Assembly.
Both Acts are generally opposed by the business community. Both the National Federation of Independent Businesses and the Illinois Chamber of Commerce have publically expressed opposition.
The “Geolocation Privacy Protection Act” governs whether a person, business, or group can collect, use, store, or disclose geolocation information on a person’s smartphone, tablet, or laptop computer. The consumer must express consent of geolocation every time an app is launched. Opponents to the Act argue that app stores require privacy protection provisions in their terms of service, and it is redundant for the consumer to acknowledge the disclosure each time an app is launched. The concern is that there will be a decrease in use of common apps that use ones’ location. Proponents feel that an average consumer does not review disclosures.
HB3449 passed both chambers on partisan roll calls, and was then vetoed by Governor Rauner.
The “Right to Know Act” requires any business with more than ten employees that has a website create privacy policies and terms of use as to what personal information is collected. For example, businesses that offer online ordering would be impacted if they store the consumer’s address in their system. Opponents to this Act feel that this will be costly to enact and discourage growth in the technology industry, as smaller businesses may be reluctant to have an internet presence. Proponents argue that consumers need this provision in place to protect their personal data.
SB1502 passed the Senate on a partisan roll call, and remains in the House Rules Committee.
The Michael Best Strategies Illinois office continues to monitor activity on cybersecurity legislation. Check back for updates!
Cubriel: Immigration Policy and Texas Agribusiness
One of the first public appearances for President Donald Trump in 2018 was at the American Farm Bureau Federation Convention. His attendance marked the first time in 25 years that a U.S. President spoke at the convention. During his time spent with approximately 5,000 farmers and ranchers, he likely received an earful about the potential effects that his promises to enhance immigration enforcement and reform the visa program to favor highly skilled labor will have on the United States’ access to a safe and affordable domestic food supply.
Before any federal legislation has even been passed, Texas farmers are already suffering the effects of increased immigration enforcement. Immigrant apprehensions rose 40% in 2017 and President Trump has been able to tweak the visa law through executive action. This is compounded by the state’s passage last year of a “show me your papers” law. The purpose of that law is to more efficiently deport violent offenders, but the practical application has resulted in a population that is in hiding in South Texas, while much of the state’s farm labor needs are further north. If Congress takes action without considering the value of farm labor in their deliberations, the consequences could be dramatic for food growers.
After all, immigrants make up 17% of the state’s population and 26% of the agriculture workforce, making Texas agribusiness particularly vulnerable to a labor shortage.
Politically, the immigration reform proponents claim that these agriculture jobs are displacing American workers for cheaper, immigrant labor. But employment rates reveal that is simply not true. Texas currently enjoys historically low unemployment numbers, 3.5% at the end of 2017, a number that is expected to slide again in 2018.
Contributing factors to the state’s robust employment market include a thriving and diverse economy, a rebounding oil and gas industry, and Hurricane Harvey related construction. The state is expected to add another 366,000 jobs this year, a growth rate of 3%. In fact, some businesses have expressed an interest to expand, but have cited lack of available labor as a reason for not growing.
In Texas, the current average wage for farm labor is $10.67 an hour. If required to employ only U.S. citizen labor, the industry could find themselves in a position of having to replace almost one-third of its workforce, leaving some farmers to predict the future cost of labor to demand as much as $25 an hour, if that labor is available at all. The consumer will most likely be responsible for absorbing the increased production costs. And how much of a cost increase will the consumer pay for domestic meat or produce before they opt for cheaper, imported food?
Farmers are rightfully anxious about the impact of immigration reform, but history tells us that the reality of immigration reform becoming law is more difficult than firing off a tweet. The last immigration reform bill that actually became law was the Immigration Control and Reform Act of 1986, signed by President Ronald Reagan, that traded amnesty for increased enforcement. While amnesty was granted, the promised increased enforcement efforts were never realized, or were proven to be ineffective. Since then, several U.S. presidents have promised increased enforcement, including President Bill Clinton and President Barack Obama. In fact, immigrant deportations peaked at 77,857 in 2016, during President Obama’s administration.
President Trump is currently working to negotiate with Democrats in Congress on a solution to give continued legal status to immigrants who arrived illegally as small children with their parents, more commonly known as the Deferred Action for Childhood Arrivals (DACA), in exchange for increased border enforcement resources and revisions to visa policy that is partial to skilled labor over farm labor.
In the meantime, there is much uncertainty for business owners and their employees. Already, anecdotal evidence of the labor shortage adversely affecting Texas agriculture is available. Farms in the Panhandle have sold off acreage and have had to watch healthy crops die for lack of farm labor. Testimony last July to the U.S. House of Representatives Agriculture Committee revealed the labor struggles of farmers and ranchers across the state. Meanwhile, business owners don’t know if their employees’ visas will be renewed or if those here illegally will be deported as the result of a broken tail light.
Increased immigration reform and a restructuring of the U.S. visa program certainly have their merits and President Trump is right to pursue new immigration policy. After all, our economy and population have changed quite dramatically in the last 30 years. Furthermore, governments have a right and a responsibility to know who is coming and going from their shores. But our nation’s food supply is relying on immigration reform that places an increased, not diminished, value on farm labor.
The State of Redistricting in the Courts
Redistricting practices are the subject of argument in federal courts across the country – including six cases (Wisconsin and Texas among them) that have made their way to the Supreme Court.
The Brennan Center for Justice at New York University School of Law tracks the status and timelines of redistricting litigation.
The resolution to these cases may impact elections as early as this November. The Supreme Court will almost certainly rule on the Wisconsin case prior to the end of the current session in late June, but may rule earlier.
Any ruling against current redistricting practices will be complicated by the potential remedies the courts may order. Watch for our future analysis of potential court remedies.
Wisconsin: Governor Walker Proposes Healthcare Fixes
Healthcare continues to be a hot topic in Wisconsin and nationally and has very recently jumped to the forefront. Both parties are recognizing the general public’s insecurity about affordability, and stability of healthcare coverage. There is also a fear regarding pre-existing conditions.
In order to address these dynamics, as well as the instability of the individual insurance market and the federally facilitated marketplace (exchange), Wisconsin Governor Scott Walker outlined three key proposals to address healthcare concerns in his annual State of the State Address:
1332 Waivers (pursuant to the Affordable Care Act). This process would be used to establish a reinsurance program to address dramatic growth in premiums in the individual market and on the exchange (for example, rates for 2018 doubled in one rate region in Wisconsin, while some insurers dropped out entirely). Such waivers have been approved by the federal government for Minnesota, Oregon, and Alaska. The Wisconsin waiver is likely to be modeled similar to that of Minnesota, where premiums were reduced by 20%, according to materials from the Walker Administration. The Governor has proposed a $200 million program, with $150 million funded by the federal government and $50 million in state funds from the Medicaid program, which is experiencing a healthy surplus. As such, no new state funds are required. The Affordable Care Act (ACA) requires the state legislature to authorize the waiver request.
Legislation to ensure consumer protections for those with pre-existing conditions. While the ACA currently provides such protections, efforts to “repeal and replace” the ACA have spotlighted pre-existing conditions as a key concern for the public. A state law in this regard would ensure the continuation of such protections if the ACA were to be repealed, or if federal administrative actions modified current protections. Legislation to implement such a change, Assembly Bill 65, passed the Assembly in June 2017. However, that was during a heated floor debate with both sides playing “insider baseball” with this bill. Therefore, many acknowledge this bill would need amendments if it is indeed to become law and reflect the governor’s intent. Governor Walker has indicated he is flexible regarding the vehicle for addressing pre-existing conditions.
A permanent waiver for SeniorCare prescription drug assistance program. SeniorCare is a state-based prescription drug assistance program for Wisconsin residents who are 65 years of age or older and meet certain income and other requirements. It is the only program of its kind in the nation and has been highly successful and popular. The Legislature has rejected two previous budget proposals to phase out the program in favor of Medicare Part D; the governor is now proposing to eliminate the need to continually seek extensions. It is unclear if the federal government has the authority to approve a permanent waiver, although there is a fast track process for waiver extensions.
Beyond these specific initiatives, other 1332 Waiver items could be pursued, such as high-risk insurance pools, as well as broader Medicaid reforms through the 1115 Waiver amendment process. Uncertainty over congressional and Trump Administration action regarding the ACA further complicates such initiatives, despite newly allowing work requirements as part of Medicaid.
Part 1: Colorado’s Population Growth and Transportation
Colorado has experienced explosive population growth in recent years, which requires some new thinking when it comes to the state’s transportation, housing strategy and water supply.
In the first installment of a four-part series, Michael Best Strategies’ Alex Hayes examines the transportation issue.
Though Colorado’s explosive growth has slowed to some degree, its 77,000 new residents between July 1, 2016 and July 1, 2017 made Colorado the 8th fastest growing state. State demographers expect Colorado to add another 2.2 million people by 2040. In order for Colorado to continue its unprecedented economic growth and maintain the high quality of life that has attracted so many younger Americans and employers in recent years, the state must address a number of important issues, including transportation infrastructure.
The large influx of people to Colorado has led to choked roads and near constant traffic headaches. It’s a problem that’s not likely to ease up any time soon. In 2015, the Colorado Department of Transportation (CDOT) projected it would need roughly $40 billion to build and maintain proper infrastructure to handle expected population growth. That is more than double what it expects to collect in that time. Already, the state’s infrastructure is woefully underfunded with a number of priority projects stuck in limbo. CDOT’s statewide transportation plan currently has a $1 billion annual shortfall.
Transportation funding has been a dominant, though controversial, policy issue for the state in recent years. Despite acknowledgement across the board that addressing the state’s transportation needs should be a top priority, Republicans and Democrats have diverged significantly on how to do so. In 2017, leadership from both parties began the General Assembly with an ambitious proposal for road funding. However, Republicans in the Senate balked at the idea of an increase in taxes to pay for the effort, arguing that the funds already exist in the state’s coffers, and that it simply requires some difficult decision-making and cuts in other areas of spending. Republicans and Democrats also disagree on how funding should be spent, with Democrats pushing for improved public transit systems and better bike lanes and sidewalks, while Republicans want money for road improvements and construction. The 2017 session ended with a broad omnibus bill, that included, among many other things, $1.8 billion in transportation funding, $1.2 billion of which comes from the existing CDOT budget.
The 2018 legislative session brings a renewed effort to address Colorado’s transportation needs, with Governor Hickenlooper and House and Senate leadership tagging transportation funding as a top priority in their respective year-opening speeches. Senate Republicans have already introduced a bill (SB 18-001) that would ask for $3.5 billion in bonds to pay for priority projects. It would require the state to set aside about $300 million annually to pay for the bonds. The bill has the support of many of the state’s chambers of commerce and business organizations. However, in a contentious election year, there is significant doubt that the legislature will be able to deliver, leaving many looking to the 2018 ballot for potential solutions.
Watch for future installments regarding Colorado’s population growth and infrastructure considerations, as well as updates about SB 18-001.
Is 2018 the Year of Big Profits for Oil and Gas?
At what point is oil and gas exploration and production profitable?
In the fall of 2014, the break-even price per barrel was anywhere between $59-$82.
Today, most companies are breaking even for about $40 per barrel and some predict that $20 break-even points are possible in the near future.
Reasons for the decline in production costs include:
During the downturn, companies were forced to become more efficient.
- In 2014, Texas employed 300,000 people in the oil and gas industry. Estimates put that number at about 200,000 today, even though production is at an all-time high.
- Discovery of local sand as a proppant for shale yields a 40% savings on sand expenses, lowering the overall shale production by 5%.
Improved technologies account for 10% of savings.
- Turbines are more efficient than ever. Each percentage of increased efficiency represents millions of dollars of production savings.
- The cost of digital technology is lower than ever.
- The ability to re-drill wells that were previously dry with deeper technologies.
- The use of data analytics allows for more precise drilling.
Tax reform will have an impact on profitability.
- The decrease in the corporate tax rate will equal a $1 billion savings to the industry.
- Companies will be allowed to expense 100% of capital investment over five years.
- Independent producers will benefit from a simplified tax code.
One vulnerability for the industry as oil and gas productions continue to increase is the potential for rising labor costs and field services. Michael Best Strategies will continue to track oil and gas trends in Texas and nationwide.
