Heading into the summer, Congress has remained focused on completing the national defense authorization bill, appropriations for Fiscal Year 2019 (FY 2019), and advancing legislation to address opioid abuse. Lawmakers are eager to demonstrate action prior to the upcoming midterm elections, prompting Senate Majority Leader Mitch McConnell (R-KY) to issue a statement canceling the majority of the Senate’s August recess. At the same time, the Trump Administration continues to generate major news on immigration, foreign policy, and trade, including the recent high-profile summit between President Trump and North Korea’s Kim Jong-un and new tariffs announced on China, the European Union, Canada, and Mexico. The Administration has also continued to promote its drug-pricing plan and recently released new widely anticipated regulations on association health plans.
In this month’s Washington, D.C. Update, we examine:
- Senate Passes Defense Authorization Bill, Including Penalties on China’s ZTE and New Authority for CFIUS
- Trump Administration Releases Regulations to Expand Association Health Plans
- House Passes First Appropriations Bills of the Cycle; Rescissions Package Passes House, Senate Prospects Unclear
- Opioids Focus in Congress: House Passes Dozens of Opioids Bills; Senate Finance and HELP Committees Advance Draft Legislation
- Azar Targets Drug Rebates and Medicare Part B for Drug Pricing Policy Changes
- Trade Tensions Escalate After Trump Administration Imposes Technology Tariffs on China and Steel and Aluminum Tariffs on Allies
- Department of Justice’s Stance on Legal Challenge to ACA Reignites Fight over Protections for Pre-Existing Conditions
- Dodd-Frank Law Loosened by the House; Volcker Rule Changes Proposed by the Fed
Please feel free to reach out for additional information on these topics or other issues of importance.
Senate Passes Defense Authorization Bill, Including Penalties on China’s ZTE and New Authority for CFIUS
On June 18, the U.S. Senate voted 85-10 to approve the annual National Defense Authorization Act (NDAA), authorizing a total of $716 billion in Fiscal Year 2019 (FY 2019) for national defense. The NDAA authorizes a base defense budget of $639 billion for the Department of Defense and national security programs at the Department of Energy. The NDAA also authorizes $69 billion for Overseas Contingency Operations. Next, a joint conference committee will meet to resolve differences between the House and Senate bills, a process House Armed Services Committee Chairman Mac Thornberry (R-TX) hopes to finish by the end of July. However, many observers do not expect final resolution until the end of the year.
On June 19, the Department of Labor (DOL) released a final rule to expand access to association health plans (AHPs), which allow employers to form groups to collectively purchase health coverage for their employees. The new AHPs will not be subject to the full coverage or non-discrimination requirements under the Affordable Care Act (ACA), allowing these plans more flexibility on benefit designs and premiums. The Administration and Republican lawmakers argue that expanding AHPs will provide cheaper alternatives for small businesses and self-employed individuals that have struggled to find affordable options in the ACA’s insurance exchanges. However, Democrats, state regulators, and many health care stakeholders warn that expanding AHPs is likely to drive up premiums in the ACA’s insurance exchanges by siphoning off younger and healthier consumers.
Baker Donelson issued an overview of the new regulations on AHPs on June 20, available here.
The Congressional Budget Office estimates that the new regulations will result in approximately four million additional individuals enrolling in AHPs by 2023, including approximately 400,000 previously uninsured individuals. However, CBO also projects that due to the new regulations on AHPs and Short-Term Limited Duration Insurance Plans, average premiums will increase two to three percent in the ACA insurance exchanges.
House Passes First Appropriations Bills of the Cycle; Rescissions Package Passes House, Senate Prospects Unclear
On Friday, June 8, the House passed a roughly $147 billion three-bill FY 2019 spending package on a 235 to 179 vote, overcoming Democratic objections to environmental policy riders and funding priorities in the GOP-drafted Energy-Water title. The “minibus,” which also includes the Military Construction-VA and Legislative Branch measures, is the first of what House GOP leaders expect to be a series of three-bill packages to try to expedite passage of at least a few of the 12 annual spending bills before the end of the fiscal year on September 30. On final passage, 16 Republicans crossed the aisle to vote “no” on the package, but these votes were outweighed by 23 Democratic votes in favor of the minibus.
Opioids Focus in Congress: House Passes Dozens of Opioids Bills; Senate Finance and HELP Committees Advance Draft Legislation
Given broad interest in addressing opioid abuse and growing public pressure, both the House and Senate are considering a broad range of bills designed to address opioids, with lawmakers working to pass legislation during the summer to demonstrate action before the midterm elections.
The House passed 39 opioids-related bills last week, including incremental measures to reduce excess and unused prescription opioids in circulation, increase access to addiction treatment and alternative pain treatments, restrict imported fentanyl arriving through international mail, and expand coverage for telehealth treatment for substance use disorder. The House advanced most of the bills by a voice vote. On June 14, Ways and Means Committee Chairman Kevin Brady (R-TX) and Ranking Member Richard Neal (D-MA), and Energy and Commerce Committee Chairman Greg Walden (R-OR) and Ranking Member Frank Pallone Jr. (D-NJ) introduced H.R. 6, the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act. House Leadership intends for H.R. 6 to serve as the underlying vehicle for the majority of House-passed bills on opioids. The House has continued voting on dozens of additional proposals this week and aims to wrap up the focus on opioids legislation, including voting on H.R. 6, by the end of the week.
Health and Human Services (HHS) Secretary Alex Azar has continued to promote and expand on the Trump Administration’s new Drug Pricing Blueprint through media appearances and congressional testimonies over the past several weeks.
In a Senate Health, Education, Labor and Pensions (HELP) Committee hearing on June 12, Azar called particular attention to the idea of eliminating drug rebates to pharmacy benefit managers (PBMs) and encouraging a pricing system “where PBMs and drug companies just negotiate fixed-price contracts.” Under the current system, drug manufacturers set initial list prices and PBMs negotiate discounts or rebates down from those list prices. Azar contended that eliminating drug rebates and using fixed-price discounts would better incentivize companies to set lower list prices. Azar believes HHS has the regulatory authority to eliminate rebates in Medicare Part D. Replacing the drug rebate system with a fixed-price contract system may have major implications for the drug industry. There is uncertainty regarding the details of how a fixed-price contract system would operate and whether the Trump Administration could implement such a change without Congress.
Trade Tensions Escalate After Trump Administration Imposes Steel and Aluminum Tariffs on Allies and Technology Tariffs on China
On Thursday, May 31, President Trump announced he would impose tariffs on imported steel and aluminum from the European Union, Canada, and Mexico, triggering immediate retaliation from U.S. allies and protests from American businesses and farmers. The tariffs – 25 percent on steel and 10 percent on aluminum – took effect at midnight that night, marking a major escalation of the tension between the United States and its top trading partners. Stung by the U.S. action, the allies quickly hit back. The E.U. stated it would impose import taxes on politically sensitive items like bourbon from Senate Majority Leader Mitch McConnell’s home state of Kentucky. Mexico said it would levy tariffs on American farm products, while Canada zeroed in on the same metals that Trump had targeted.
Department of Justice’s Stance on Legal Challenge to ACA Reignites Fight over Protections for Pre-Existing Conditions
On June 7, the Department of Justice (DOJ) filed a legal brief in support of a lawsuit from 20 states seeking to invalidate the Affordable Care Act (ACA), urging the federal court considering the case to strike down the ACA’s protections for pre-existing conditions. The Texas-led lawsuit, Texas v. United States Department of Health and Human Services, claims that Congress’s recent elimination of the ACA’s individual mandate penalty means that the individual mandate is now unconstitutional. As a result, the plaintiffs argue that the entire statute is now invalid because the individual mandate is central to the law. The Trump Administration agreed in its filing that the individual mandate is unconstitutional and claims that the federal court should also strike down the ACA’s guaranteed issue and community rating provisions because those provisions are too closely tied to the individual mandate. In a letter to House Speaker Paul Ryan, Attorney General Jeff Sessions acknowledged that the executive branch typically defends existing federal law, but stated that this is a “rare case where the proper course” is to forgo a defense.
On May 22, by a vote of 258-159, the House approved a Senate-passed bill to free thousands of small and medium-sized banks from strict rules that had been enacted in 2010 as part of the Dodd-Frank law intended to prevent another financial crisis. The bipartisan passage in both the House and the Senate handed a significant victory to President Trump, who promised to undo the Dodd-Frank regulations. The bill stopped short of unwinding the toughened regulatory regime put in place to prevent the nation’s biggest banks from engaging in risky behavior, but it still represents a substantial change to the Obama-era rules governing a large swath of the banking system. The legislation will leave fewer than ten big banks in the United States subject to stricter federal oversight, freeing thousands of banks with less than $250 billion in assets from the restrictions.
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