New Year, New Congress
Despite a divided Congress, we look to make headway on Council legislative priorities in 2023.
It’s the beginning of a new year and a new Congress, with 82 freshmen members of Congress this cycle—seven in the Senate (five Republicans, two Democrats) and 75 in the House (41 Republicans, 34 Democrats).
The numbers represent a much-needed fresh start in the Capitol building. The last Congress started with an insurrection in the midst of a global health crisis and ended with the longest Speaker in American history stepping down after what she describes as the country’s most productive Congressional sessions. Single-party control lends itself to such statements despite the painstaking intraparty deliberations that we all bore witness to over the past two years.
We all know now that this Congress is divided and the days of single-party rule are over. House Speaker Kevin McCarthy (R-California) will be managing the House of Representative with a five-vote razor-thin margin, and Senate Majority Leader Chuck Schumer (D-New York) has a stronger majority than he had in the last Congress, allowing him the slightest wiggle room to continue implementing President Biden’s agenda. The most emboldened factions in Washington today are the MAGA-wing of the House Republicans (as was made painfully obvious during the days-long challenge this group made to McCarthy in securing his Speaker role) and the moderate House Democrats who survived their epitaph written by mainstream media last fall. The weakest faction? House progressives, i.e., “The Squad.”
The election of Hakeem Jefferies (D-New York) to lead the Democratic minority in the House puts a seasoned and vocal moderate at the helm, and new leadership positions representing conservative Democrats significantly rebalance philosophical control of the party. Drama in the House will of course continue, where rumors abound over Republican infighting. Their unified support will be needed for the Speaker to pass anything without Democratic support. However, with Democrats in control of the Senate and the White House, Speaker McCarthy really needs to deliver on only two items—federal funding to keep the government operational and raising the debt ceiling to avoid another economic crisis. With the five-seat majority, neither is guaranteed. And the concessions given to the far-right members of his caucus to move past the Speaker vote will make those deliverables particularly difficult to achieve, considering they will need to find common ground with the White House. One could argue that the scenario presents opportunities for bipartisanship—if moderate Democrats and Republicans join forces on their economic common ground. But we don’t see that playing out anytime soon, particularly in presidential campaign season.
Top Issue: PBM Transparency
Our top issue in this Congress will continue to be legislation requiring pharmacy benefit managers to be subject to the same price transparency standards adhered to by commercial insurance brokers. Despite the efforts of the last Congress to lower prescription drug costs and the Congress before that to implement the price transparency that we continue to seek, the market competition that benefits your clients can’t be realized if PBMs continue to skirt regulations and hide their cost-shifting schemes. It’s an issue that has strong bipartisan support, and with the help of our allied industry advocates, we could see the legislation attached to a vehicle that could be considered “must-pass” in both the House and Senate.
An interesting twist to our crusade to strengthen employer-provided insurance markets is the new chairman of the Senate HELP (Health, Education, Labor and Pensions) Committee, Sen. Bernie Sanders (I-Vermont). Being the most vocal proponent of Medicare for All—a federal movement which, by the way, has largely collapsed as Democrats subsidized private insurance for the then-20 million uninsured Americans during the pandemic—Chairman Sanders is not expected to be a champion of the insurance industry. However, Politico recently reported that Sanders’ relationships with all private industry sectors are light compared with his predecessors on the powerful HELP committee. While his lack of industry relationships might initially be viewed as a hurdle, we think Sanders might become an unlikely ally, potentially sharing our contempt for the price gouging that results from PBM business practices.
[T]his divided political environment dramatically increases the likelihood of behemoth bills littered with pet projects written in the dead of night and passed by party line votes—where the threats are in the margins and in small print.
P&C Issues
Shifting our focus to the property and casualty side of the business, the most active legislation we’ll pursue will be passage of the SAFE Banking Act. As you know, the legislation that would allow the financial services sector to legally serve the cannabis industry failed to pass the Senate in December, despite having passed the House six times in the last Congress (!!!). The ongoing infighting among Democratic senators saw the bill slow-walked through two years of Democratic rule all the way to the session’s final weeks, when, just before inclusion in the year-end spending bill, Senate Minority Leader Mitch McConnell (R-Kentucky) and outgoing senator Pat Toomey (R-Pennsylvania) objected, dooming its inclusion with no time to spare. It was an astounding defeat to a measure that enjoys wide bipartisan support. We do expect the Democratic-controlled Senate to include the measure in must-pass legislation next year, pressuring McCarthy and House Financial Services Chairman Patrick McHenry (R-North Carolina) for their support.
Other ongoing advocacy efforts include the creation of the board of directors for the National Association of Registered Agents and Brokers (NARAB), which, once established, will create standards for an optional interstate licensing regime for agents and brokers. It’s an issue that Council president Joel Wood has been working on for nearly 30 years. As recent context, legislation creating NARAB was passed in January 2015, but the Obama administration nominations to serve on the board were never considered by the Senate, and the Trump administration never submitted a list of nominees. However, we’re now working with the White House on presidential nominations to comprise the first board of directors.
We’re hopeful that President Biden will nominate the 13 board members in the coming months and that the Senate will seamlessly approve the non-controversial nominees. I wouldn’t blame you if you laughed out loud at that line. Anything could happen, but we have the attention of the White House and the Senate Banking Committee, and we hope this is viewed as low-hanging fruit for all parties involved. (Because it’s a presidential nominating process, we avoid any drama from the Wild West House). So we believe that the time is now, and every industry stakeholder supports the action.
With those priorities leading our daily activities, our eyes and ears will continue to be all over the House Financial Services and Senate Banking Committee activities. In addition, with the rise of wildfire threats to property markets in the West and the catastrophe markets in coastal states reaching capacity, our state regulatory advocates led by our Steptoe & Johnson team are more crucial than ever.
Ultimately, even though bipartisan measures reaching the president’s desk will be few and far between, this divided political environment dramatically increases the likelihood of behemoth bills littered with pet projects written in the dead of night and passed by party line votes—where the threats are in the margins and in small print. The devil is in the details of these otherwise seemingly harmless measures and it is up to us to remain ever vigilant.
Finally, with the challenging legislative grind in Congress, we do expect an active executive branch. We’ll be watching Health and Human Services closely as they implement or tweak ACA regulations that were loosened by the Trump administration. But the most pressing issue for us right now is a recently issued proposed rule by the Federal Trade Commission that would significantly hinder non-compete agreements. The Non-Compete Clause Rule would make it unlawful for an employer to enter into or maintain a non-compete clause with its workers. The four-person commission voted 3-1 along party lines to publish the proposed rule, which comes in response to President Biden’s July 2021 Executive Order calling for the FTC to ban or limit non-compete agreements and amidst increased FTC activity on the issue. The rule is expected to garner significant attention and is likely to face judicial challenges, particularly around the FTC’s authority on this. The Council will be communicating with the FTC, and our Steptoe & Johnson team are leading the battle.
