What to Expect From Congress in an Election Year

The answer to the query in the headline is “not much,” but that is considered a vast improvement over recent years. Here is the analysis from Bo Harmon, vice president of political affairs for BIPAC.

There are a number of legislative items that members of both parties acknowledge need to be addressed. Implementation of Obamacare. Immigration reform. Tax code and entitlement reform. A long term solution to the debt ceiling crisis. Privacy security. Patent reform. Trade.

With all of these issues, the public increasingly frustrated with gridlock in Washington, and an election coming up where Congress will want to be able to talk about their accomplishments, we should expect to see some major legislative action in 2014, right? Wrong. Well, mostly wrong. There is actually a glimmer of hope that 2014 will produce more than 2013. Though, that’s a bit like saying “we scored zero points last game and expect to do better than that this time.”

The reason that Congress hasn’t accomplished much since 2010 is the same reason we don’t expect to see much more in 2014. With the House in the hands of Republicans and the Senate and White House controlled by Democrats, and each side increasingly responsive to the most ideological polarizing parts of their base, they disagree on how to proceed. Both sides understand the things that need to be addressed, but there is zero consensus on how to do it.

The Obamacare debate is a prime example. Not a single Republican in either chamber voted for original passage though many key features of the legislation were included in previous GOP health care reform bills. Once Republicans took the House in 2010, GOP leadership took the position that repeal of the legislation in total was the only option and have refused to offer or support tweaks or fixes to problems. The Republicans believe “it’s not possible to ‘fix’ something fundamentally incompatible with our ideology.” Politically, they also believe if the legislation fails they will benefit and thus have little political incentive to improve the law. From their perspective, it is BETTER politically to have as many things go wrong with ObamaCare as possible.

This same standoff occurs on issue after issue – taxes, immigration, entitlement reform, etc. But, it is a new year and in our optimistic resolutions, we see some possibility of federal action on a handful of bills. There was a small bright spot in December when a two-year budget compromise passed that would avoid the possibility of a shutdown and eliminated some of the most irrational sequester cuts. This rare bipartisan effort was criticized by many however as small ball for not addressing bigger, long term issues. Even still, it was the best that could be achieved in the current gridlock environment.

The environment is also different than it was in 2013. At that time, Democrats were emboldened by the President’s popularity and felt little need to compromise, believing they had received a mandate from the 2012 elections to do as they wanted. With the President’s approval ratings significantly lower now, the confidence to act as boldly is similarly evaporating. Conversely, Republicans spent 2013 in fear of retribution from the Tea Party. Now, Boehner in the House and McConnell in the Senate have openly broken ranks with the Tea Party and seem almost eager to act in ways that show consensus.   The budget deal and the changed political environment provide the foundation for some compromise legislation to take place on issues that need to be addressed. Small, incremental changes to a handful of issues is possible, likely driven by the middle. We may see some movement on immigration, trade, patent reform, etc; even if more contentious things like tax reform remain unlikely.

While many would like to see more comprehensive solutions and small, incremental changes to immigration or Obamacare implementation may not be at the top of your industry agenda, we are dealing with a situation where NOTHING has been getting done and we need to make an effort to support and reward even baby steps at basic government functionality. Only then will members of Congress have the political courage to attempt larger, more comprehensive changes and take a look at issues that are at the forefront of your industry agenda. It is a shame that we have reached this point where expectations for our Congressional “leaders” is so low but they have demonstrated over the last three years that nothing else can be expected from divided government driven by ideological extremes.

 

Indiana Medical Device Leaders Wary of Taxes from ACA

Gabrielle Karol of FoxBusiness.com reports on the looming taxes and fallout from the Affordable Care Act that could give some of Indiana's medical device makers big headaches. The Chamber and other business organizations continue to fight this.

In Warsaw, Indiana, known as the “Orthopedic Capital of the World,” the CEOs of medical-device companies are none too pleased with the medical-device tax imposed by ObamaCare.

In this edition of Conference Room, Iconacy CEO Tom Allen and OrthoPediatrics CEO Mark Throdahl tell FBN’s Jeff Flock that the 2.3% excise tax will have a major impact on their businesses.

“This is a tax on sales. We have no profits to pay it from, so the only way to stump up the money to pay a tax of this size is by cutting programs,” says Throdahl, whose company makes orthopedic products for children with fractures or leg or spine deformities.

Throdahl says the tax will prevent his company from growing.

“All of the engineers who surround me – their payroll is equivalent to the tax we’re now paying Washington. So we could double the size of our technical staff were it not for the medical-device tax,” says Throdahl. While Allen’s company is still in the launch phase, so the tax hasn’t yet had a major effect, he says it has hindered his ability to add staff as well.

Given that Warsaw is known for its medical-device companies, the tax could also have a profound effect on both the community and the state of Indiana.

“There are estimates that over 40,000 jobs will be impacted in the medical technology industry by the medical-device tax,” says Throdahl.

Indiana Economic Development Corp. president Eric Doden says the tax is particularly disappointing to the community given the strides made to reduce the tax burden paid by these companies.

“In Indiana, we have had a history of entrepreneurship particularly in this arena. And these are high paying jobs and the thing that sort of disappointed us as a state is that Governor Pence and the State House [have] done an incredible job of lowering taxes and trying to create a better environment for these businesses to start to grow,” says Doden. 

Chamber Members: New ACA Helpline can Help Alleviate Your Health Care Stress

Concern over the Affordable Care Act (ACA) — from its complexity to actual implementation — is something we continue to hear a lot about from the business community. To better assist with those inquiries, we are pleased to introduce a new service exclusively for Indiana Chamber members.

The Indiana Chamber's ACA Helpline is now here to help your organization navigate through the complicated health care reform processes and obligations. This FREE service is similar to the popular HR Helpline; we encourage employers of ALL sizes to use this member benefit.

Mike Ripley, Chamber vice president of health care policy, will be answering your questions. He is a former insurance agency owner and was chairman of the House Insurance Committee as a state representative.

Ripley says while employers are faced with a more reasonable timeline overall due to the employer mandate being delayed until January 2015, there is still plenty that needs to be taken care of between now and then. Virtually all the rest of the employer responsibilities and various levels of compliance remain the same — as other ACA provisions were unchanged.

Among the common questions from employers:

  • Who is considered a full-time employee?
  • What if we offer coverage but our employees don't take it?
  • What is the employer shared responsibility payment?
  • Do we have to provide notice to our employees?
  • How do we know if our coverage is affordable/provides minimum value?
  • Will our company qualify for small business tax credits?

Make your own list of issues and start using the Chamber's ACA Helpline today! Call Mike Ripley at (317) 264-6883 or send an email to mripley@indianachamber.com.

Poll: People Still Looking for Health Care Answers

Our most recent poll question asked for opinions about the Affordable Care Act, Obamacare or whatever you prefer to call the federal health care reform legislation that is going to dramatically impact so many lives in the coming months and years. The responses to the four choices are interesting, as always, but we want to also share some of the comments in the "other" category.

Results:

  • 60%: more questions than answers remain
  • 15%: exchanges will be the solution
  • 13%: other (see below)
  • 8%: "wait and see" is the way to go for 2014
  • 4%: employers will "pay" rather than "play"

Comments:

  • "It's a train wreck regardless of who you are"
  • "A good first step in health care reform"
  • "Part-time will become the norm; exchanges too expensive, i.e.,annual income down"
  • "Repeal; it's a piece of !@#$"

The current question (upper right of the page) deals with the U.S. Supreme Court.

Don’t be Unprepared Because of Health Care Reform Myths

Tracey Gavin of Apex Benefits Group wrote a notable column for Inside INdiana Business recently, pointing out the dangers for employers of not being prepared for fallout of the Affordable Care Act. She lists eight common myths that you need to be aware of:

Those answers could help implement solutions that go beyond compliance, but help minimize the financial impact and even capitalize on strategic opportunities through proper planning and preparation.

Myth No. 1: I don't need to worry about Health Care Reform or make any decisions until January 1, 2014.

Truth: Employers need to plan now. Some need to determine their status as "large employer" under the federal statute. Others need to begin the process of determining full-time status for certain classes or types of employees. Failure to do so can trigger maximum penalties – or worse, fines for non-compliance.

Myth No. 2: It is less expensive to terminate our medical coverage plan and just pay the penalty.

Truth: Aside from the impact on employees, many employers will find that once the penalties and tax consequences are accounted for, there may be little to no savings to terminate their coverage. In fact, some will actually pay more by terminating their plan.

Myth No. 3: An employer may ignore the law the first year or two – since they believe the worst that can happen is they end up paying some sort of penalty around $2000 per employee –minus 30.

Truth: No! A dangerous myth. An employer that is subject to the federal law – and willfully avoids compliance – is subject to a fine of $100 per day, per affected person. An employer with 50 equivalent full-time employees that ignored the law (versus an honest mistakes while trying to comply) could be fined $5000 (or more if dependents are included) per day — until the employer corrects the noncompliance. It is clearly noted in the regulations this fine can be levied at up to $500,000 per employer.

Myth No. 4: After health care reform is implemented, most employers will stop offering medical benefits.

Truth: There may be changes to plan offerings and contribution strategies, but few employers plan to drop coverage, according to a Towers Watson and National Business Coalition on Health survey. The reasons to offer coverage to employees have not changed just because health care reform was passed. For example, attracting and retaining employees remains important part of the business operating efficiently.

Myth No. 5: My carrier and broker will take care of everything.

Truth: Some will. Others may not be able to. An advisor's inability to help employers maintain compliance and quantify the financial risks leaves employers vulnerable to serious fines, penalties, excess costs and tax implications. Employers must be proactive and understand the financial viability of their employee benefits programs and impact to their organization.

Myth No. 6: A simple calculation for "pay or play" will provide our company with an accurate projection of financial risk under PPACA.

Truth: Unfortunately, this myth is perpetuated by the many online – or – "black box" calculators in the marketplace. The truth is employers need to do an analysis that captures all the inter-related and moving parts of PPACA that can impact the financial sustainability of their plan. Cost drivers such as plan design, contributions, migration, and many other factors. To complicate this, scenarios need to be modeled precisely and include projecting how changing one factor can in turn impact all the others.

Myth No. 7: Employers that offer a self-funded plan will have very little compliance costs or issues.

Truth: Self-funded plans do in some ways have more plan design flexibility under health care reform and potentially avoid some tax assessments. However, the majority of regulatory requirements apply to groups irrespective of their plan funding. Regardless of funding status, all employers will need to understand the financial ramifications of health care reform to their business and employees.

Myth No. 8: Employees would be financially advantaged by obtaining coverage through Medicaid or the Exchange.

Truth: Maybe. Certainly most individuals qualifying for Medicaid would be advantaged. Individuals who could qualify for tax subsidy may or may not be financially advantaged when premiums and out-of-pocket expenses are compared to employer-sponsored health coverage. Those whose household income is greater than 400 percent Federal Poverty Level (FPL) would be faced with much greater premiums and out-of-pocket expenses compared to employer-sponsored coverage.

Unions Growing Skeptical of Affordable Care Act

Even though labor has been a major contributor to President Obama during his two election bids, there is a growing skepticism about whether or not the Affordable Care Act — often labeled "Obamacare" — will be a benefit to their members. CBS News reports:

Some labor unions that enthusiastically backed President Barack Obama's health care overhaul are now frustrated and angry, fearful that it will jeopardize benefits for millions of their members.

Union leaders warn that unless the problem is fixed, there could be consequences for Democrats facing re-election next year.

"It makes an untruth out of what the president said — that if you like your insurance, you could keep it," said Joe Hansen, president of the United Food and Commercial Workers International Union. "That is not going to be true for millions of workers now."

The problem lies in the unique multiemployer health plans that cover unionized workers in retail, construction, transportation and other industries with seasonal or temporary employment. Known as Taft-Hartley plans, they are jointly administered by unions and smaller employers that pool resources to offer more than 20 million workers and family members continuous coverage, even during times of unemployment.

The union plans were already more costly to run than traditional single-employer health plans.

But Obama's Affordable Care Act has added to that cost — for the unions' and other plans — by requiring health plans to cover dependents up to age 26, eliminate annual or lifetime coverage limits and extend coverage to people with pre-existing conditions…

Unions backed the health care legislation because they expected it to curb inflation in health coverage, reduce the number of uninsured Americans and level the playing field for companies that were already providing quality benefits. While unions knew there were lingering issues after the law passed, they believed those could be fixed through rulemaking.

But last month, the union representing roofers issued a statement calling for "repeal or complete reform" of the health care law. Kinsey Robinson, president of the United Union of Roofers, Waterproofers and Allied Workers, complained that labor's concerns over the health care law "have not been addressed, or in some instances, totally ignored."

Spend, Spend and More Spend

Few will argue with the idea that federal government spending is out of control. The Heritage Foundation's Federal Spending by the Numbers is a comprehensive look at the situation. We'll share a few of the many bullet points that just make me (and I'm sure many of you) wonder why our political leaders can't realize that the current course is a disastrous one.

  • Over the past 20 years, federal spending grew 71 percent faster than inflation.
  • In 1962, defense spending was nearly half the total federal budget (49 percent); Social Security and other mandatory programs were less than one-third of the budget (31 percent). Two major entitlement programs, Medicaid and Medicare, were signed into law by President Johnson in 1965.
  • In 2012 entitlements were nearly 62 percent of total spending, while defense dropped to less than one-fifth (18.7 percent) of the budget.
  • Federal spending per household reached $29,691 in 2012, a 29 percent increase (adjusted for inflation) from $23,010 in 2002. The government collected $20,293 per household in taxes in 2012.
  • The excess of spending over taxes produced a budget deficit of $9,398 per household in 2012.
  • For every $6.80 the federal government collected in taxes in 2012, it spent $10. Consequently, $3.20 out of every $10 spent was borrowed.
  • Major entitlements (Social Security, Medicare, Medicaid, Children's Health Insurance Program, Obamacare) will increase from 44 percent of federal spending in 2012 to 57 percent in 2022.
  • In 1993, Social Security surpassed national defense as the largest federal spending category, and remains first today.
  • Federal energy spending has increased steadily over the past decade with the government increasingly subsidizing activities like energy efficiency, energy supply, and technology commercialization. An unprecedented $42 billion was spent in 2009 as part of the stimulus, a nine-fold increase over the 2008 spending level.
  • Interest on the debt is the fifth largest federal spending category, even at today’s low interest rates.
  • All entitlements (excluding net interest) total nearly 62 percent of all federal spending today.
  • Spending on the largest, Social Security, Medicare, and Medicaid, will leap from 10.4 percent of GDP in 2012 to 18.2 percent by 2048.
  • The big three entitlements alone will absorb all tax revenues by 2048. Other spending, such as national defense or interest on the debt would have to be financed completely on borrowed money.
  • Medicare is the fastest-growing major entitlement, growing 68 percent since 2002. Medicaid grew 38 percent and Social Security 37 percent.

CBO Estimate of Those Who Will Lose Employer-Provided Health Insurance Under ACA Doubles

The Washington Times reports that many more Americans than previously thought will lose employer-provided health insurance due to the newly enacted health care law, supported by President Obama. This unfortunately contradicts his campaign rhetoric during the 2012 debates and speeches on the matter.

President Obama's health care law will push 7 million people out of their job-based insurance coverage — nearly twice the previous estimate, according to the latest estimates from the Congressional Budget Office released Tuesday.

CBO said that this year's tax cuts have changed the incentives for businesses and made it less attractive to pay for insurance, meaning fewer will decide to do so. Instead, they'll choose to pay a penalty to the government, totaling $13 billion in higher fees over the next decade.

But the non-partisan agency also expects fewer people to have to pay individual penalties to the IRS than it earlier projects, because of a better method for calculating incomes that found more people will be exempt.

Overall, the new health provisions are expected to cost the government $1.165 trillion over the next decade — the same as last year's projection.

With other spending cuts and tax increases called for in the health law, though, CBO still says Mr. Obama's signature achievement will reduce budget deficits in the short term.

During the health care debate Mr. Obama had said individuals would be able to keep their plans.

Worst of the Worst in 2012 Regulations

There’s room for one last "Bottom 10" list of 2012. With thousands of new government regulations each year, it’s difficult to select the worst new rules put into place. Two Heritage Foundation experts give it a try, starting with 1,099 pages of new mortgage disclosure rules that have the stated goal of simplifying home loans.

(10) Mortgaging the Future: New mortgage disclosure rules were released in July by the newly created Consumer Financial Protection Bureau, with a stated goal of simplifying home loans. The rules run an astonishing 1,099 pages. The net result of this and similar rules? Fewer consumer mortgage lending options and increased costs.

(9) Tracking Your Travels: In December, the Department of Transportation proposed that electronic data recorders, popularly known as "black boxes," be required in most cars starting in 2014. The stated goal is to collect more information about car accidents. But this spooks privacy advocates, who warn that federal bureaucrats could misuse this information.

(8) Essential Choice Cutbacks: Under the Obamacare "essential benefits" rule, health insurers will be forced to cover health care services that the government deems essential, whether you want to buy them or not. The net result will be to increase health care costs, increasing the burden on consumers, employers and taxpayers.

(7) Instant Union: In April, the National Labor Relations Board issued new rules that shortened the time allowed for union-organizing elections to between 10 and 21 days. This leaves little time for employees to make a fully informed choice on unionizing, threatening to leave workers and management alike under unwanted union regimes.

(6) Don’t Let Them Eat Cake: The Department of Agriculture in January published detailed new nutrition standards for school lunch and breakfast programs. More than 98,000 elementary and secondary schools are affected – at a cost exceeding $3.4 billion over the next four years. The new rules sparked protests, and even a few hunger strikes, from students nationwide.

(5) Cleaned Out: Regulators admit that the new Energy Department rules governing dishwashers will do little to improve the environment. Rather, proponents claim they will save consumers money. But they will also increase the price of dishwashers, and only about one in six consumers will keep their dishwasher long enough to recoup the cost.

(4) Soda Socialism: On Sept. 13, at the behest of Mayor Michael Bloomberg, the New York Board of Health banned the sale of soda and other sweetened drinks in containers larger than 16 ounces. New Yorkers apparently are still allowed refills, at least for now. No word on how many NYC cops will be moved from crime prevention to monitor the city’s soda fountains.

(3) Sticker Shock: Adopted in August, these new automobile mileage rules require a whopping average fuel economy of 54.5 miles per gallon by 2025. Sticker prices will jump by hundreds of dollars. Regulators argue that the fuel savings will make up these costs. Whether consumers want to make such a tradeoff doesn’t matter. The government has decided for them.

(2) Increasing Energy Costs: The Environmental Protection Agency in February finalized strict new emissions standards for coal- and oil-fired electric utilities. The benefits are highly questionable, with the vast majority being unrelated to the emissions targeted by the regulation. The costs, unfortunately, are certain: estimated to be $9.6 billion annually. The regulations are likely to undermine energy reliability and raise energy costs across the entire economy.

(1) Conscience Denial: The Department of Health and Human Services on Feb. 15 finalized its mandate that all health insurance plans include coverage for abortion-inducing drugs, sterilization procedures, and contraceptives. The mandate allows no exception for church-affiliated schools, hospitals and charities whose religious principles conflict with the mandate. To date, 42 lawsuits representing more than 110 plaintiffs have been filed challenging this restriction on religious liberty as a violation of First Amendment.

Noblesville’s RMI Expanding Business, Adding Talent

Historically, RMI in Noblesville has focused on orthopedic solutions for spinal surgeries, as well as hip and knee replacements. It’s had quite a bit of success in this industry, but RMI leadership now sees an opportunity to expand its focus.

"More recently, we’ve been looking for opportunities for growth in the non-medical field," President James Evans explains. "So we’re in the process of getting our aerospace certification."

Evans relays that expansion is one of the key reasons the company moved to Noblesville from Rochester in fall 2011. He explains the move gave the company more access to talent, and provided a more central location and close proximity to customers. While quite an undertaking, 19 of RMI’s Rochester staffers made the move south with the company, which currently has 25 employees (although that number will grow to 28 in the near future and well beyond once it expands into aerospace).

"We build low volume precision components out of exotic materials for the medical industry," Evans clarifies. "It’s a natural outgrowth opportunity to build products for other markets. Aerospace (and government, high-reliability military and aviation industries) all have requirements for the kind of capability that we have. Fairly high value componentry and assemblies are what we specialize in. In the spinal parts we build, the cervical plates, the hooks, the rods, the screws, which are mainly out of titanium and stainless steel and exotic plastics — we could really apply those to other markets."

Evans adds that the company has worked to evolve from just a component supplier and has expanded into full assemblies, which now comprise 40% to 50% of its business.

"When you start adding components together as part of an assembly, you have all of the interferences and system-level issues that you uncover," he notes. "And frankly, most of our competitors don’t want that hassle — so we look for more of those opportunities and that separates us from the competition."

He adds that the company now focuses on getting products to market faster by increasing engineering staff and adding equipment, which has helped build customer satisfaction and loyalty.

Evans remarks that RMI now serves more second tier developers.

"In 2005, most of our business was with large OEMs (original equipment manufacturers), and we had very little flexibility in defining the manufacturing of these products," he says. "We had little say in product improvements, and now we’re with customers who are competitive with large OEMs; they’re design houses and they’re working with orthopedic groups. … they look to us for manufacturing solutions."

Challenges still face Hoosier companies in the medical device industry.

"With people out of work, they don’t have insurance and put off having surgeries," Evans offers. "People are also doing tigher inventory controls, so purchasing habits have changed and so we don’t get as many large orders as we used to get. And of course Obamacare has had its own set of challenges, as well as the medical device tax — those things will affect the marketplace."

When asked about Indiana’s pipeline of talent for his industry, Evans explains central Indiana provides more access to talent, but he believes the state has room for improvement.

"The people who actually run our machinery, they need to be trained machinists and need to know a lot about metallurgy and inspection processes, and we have to train every one of them that comes in here," he asserts. "So there’s always a talent gap."

Would you like to know more about RMI or its products? Reach out to Evans at jevans@rmi.us.com.