BACKGROUNDER – HHR Policy Group April 15, 2021

1. Welcome (3 minutes: 11:00 a.m. – 11:03 a.m.)

2. Discussion: President Biden’s American Jobs Plan (15 minutes: 11:03 a.m. – 11:18 a.m.) As a reminder, this is a presidential proposal, the Congressional timeline for legislative language and a bill is not yet clear. A lot of changes will be made to this plan before we see actual text of a piece of legislation. House Speaker Nancy Pelosi (D-Calif.), has reportedly said that she hopes to pass a bill by July 4 – an ambitious target for such a mammoth piece of legislation which still needs to be drafted and scored.

Just weeks after enacting the $1.9 trillion American Rescue Plan Act, the Biden administration unveiled the American Jobs Plan—its $2.3 trillion infrastructure package. The broad outline released by the White House (there is, of course, no actual bill yet) proposes investing in U.S. roads and bridges, the electrical grid, high-speed broadband, and the like. It also goes further, pledging to delve into the “care economy,” supply chains, climate science, “small business incubators and innovation hubs,” and, of course, labor and employment.

Though this is all theoretical at this point, here is what the administration says it hopes is included in the legislation on the labor and employment side:

PRO Act. The proposal is peppered with language supporting “union jobs” and collective bargaining on the grounds that “increased unionization can also impact … economic growth overall by improving worker productivity.” The proposal explicitly endorses the Protecting the Right to Organize (PRO) Act, though without legislative text, we don’t know what this endorsement means, exactly. But it is possible that the PRO Act might be put into the eventual American Jobs Plan bill. Since its inception, NSBA has been opposed to the PRO Act. Increased enforcement. The summary of the proposal states, “The President’s plan includes funding to strengthen the capacity of our labor enforcement agencies to protect against discrimination, protect wages and benefits, enforce health and safety safeguards, strengthen health care and pensions plans, and promote union organizing and collective bargaining.” Increased penalties for employers. The summary states, “In addition to a $10 billion investment in enforcement as part of the plan’s workforce proposals, the President is calling for increased penalties when employers violate workplace safety and health rules.”

Paycheck Fairness Act. The summary fact sheet states that the infrastructure plan “tackles pay inequities based on gender.” Again, there are no details, but the is a top priority for Democrats. Please see agenda item #4 below for more details.

Contractor blacklisting and union neutrality. The proposal also seems to include some version of the rescinded contractor blacklisting scheme, as well as union neutrality requirements, as it states, “The President’s plan says that employers benefitting from these investments follow strong labor standards and remain neutral when their employees seek to organize a union and bargain collectively.”

Federally funded projects. The proposal appears to double down on Davis-Bacon Act prevailing wages and project labor agreements.

From a healthcare perspective, the plan would allocate $400 billion toward home-based services and caregiving by expanding home and community-based services under Medicaid as a mandatory benefit, and would provide $18 billion to upgrade VA hospitals.

Importantly, President Biden plans to release a second package in mid-April that will include more healthcare-related and social policies such as drug price reform and permanent ACA enhanced premium subsidies.

Senator Bernie Sanders (I-Vt.), along with some Democrats, are advocating for the inclusion of policies related to expanding health insurance such as lowering the Medicare age or a public option within the second portion.

According to the corresponding American Jobs Plan Fact Sheet, the president’s infrastructure proposal would provide $100 billion for broadband infrastructure, over $180 billion in new R&D investments for research and innovation broadly, and $30 billion to support several biopreparedness and biosecurity priorities. Within the $180 billion R&D investment is a proposed $50 billion for a new technology directorate within the National Science Foundation, $40 billion to upgrade research lab infrastructure, $35 billion in clean energy technology, and $25 billion for Historically Black Colleges and Universities and other minority serving institutions to address racial and gender inequities in research.

The proposal also would invest in transportation infrastructure such as highways, bridges, and airports; access to clean water, electricity, and broadband; renovating and building homes, schools, and buildings with more energy efficient technology; growing the home care workforce; and R&D including manufacturing and supply chains.

President Biden is bolstered by a Democratic Congress, though the tight margins in the Senate make passing the sweeping proposal more challenging. Congressional Democrats have hinted that if need be, they will push through parts or all of the package through the reconciliation process, which would allow Congress to enact legislation on taxes, spending and the debt limit with just 51 votes of the Senate.

Fortunately for Biden, on April 5, the Senate parliamentarian greenlighted a strategy that would allow Democrats in the evenly split 50-50 chamber to rely on a 51-vote threshold to advance some bills, rather than the typical 60 votes typically needed. The so-called budget reconciliation rules can now be used more often than expected — giving Democrats a fresh new path around the Republican blockade.

The prospects for a massive infrastructure investment, once a bipartisan source of unity on Capitol Hill, have cracked and groaned under the weight of political polarization. Where Biden sees an urgency in going big, Republicans want a narrow plan that focuses on roads and bridges, and warn that any corporate tax increase would crush economic growth.

The standoff almost ensures a months-long slog as Congress hunkers down to begin drafting legislation and the White House keeps the door open to working across the aisle with Republicans, hoping that continued public attention will drum up support. However, Senate Republican leader Mitch McConnell (R-Ky.) declared plainly that Biden’s plan is “something we’re not going to do.”

A core dividing line is Biden’s effort to pay for infrastructure by undoing Donald Trump’s tax break for corporations, a signature achievement of the Trump White House and its partners in Congress. The 2017 Republican tax bill, which all the Republicans voted for, slashed the corporate rate from 35 percent to 21 percent. Biden proposes raising the rate to 28 percent and instituting a global minimum rate to dissuade companies from relocating in lower-tax havens.

Shepherding Biden’s proposal through Congress remains a work in progress, particularly in the evenly-divided 50-50 Senate, where Democrats have the majority because the vice president from their party, Kamala Harris, can cast a tie-breaking vote.

But a single senator can break ranks to influence the size and shape of the package. Recently, Sen. Joe Manchin (D-W.Va.), indicated he would prefer a corporate tax rate at 25 percent, lower than what Biden is proposing.

Seizing on Democratic divisions, Republicans have signaled zero interest in undoing the tax cuts they approved with Trump, and instead prefer a smaller infrastructure package paid for by user fees on drivers or other public-private partnerships that share the costs.

Sen. Roy Blunt (R-Mo.) a member of Senate Republican leadership, said a smaller infrastructure package of about $615 billion, or 30 percent of what Biden is proposing, could draw bipartisan support.

Administration officials have encouraged Republicans to talk more fully about what they dislike and would do instead, under the opinion that a battle of ideas will only help Biden gain support with voters.

3. Discussion / Actionable: The Coalition for Cannabis Policy, Education, and Regulation (15 minutes: 11:18 a.m. – 11:33 a.m.) The coalition is seeking to engage with the small business community on the overall issue of cannabis – e.g., safety, impact on the workplace – employer and employee – as well as those small businesses that may be seeking to become more engaged in the cannabis space, in general. This is a new area for NSBA that we have not previously engaged – this Policy Group will want to discuss what path NSBA should take, as the coalition is seeking NSBA’s participation. It is important to note, the coalition includes tobacco giant Altria, beer behemoths Constellation Brands (Corona, Modelo) and Molson Coors Beverage Company, two national convenience store associations, the Council of Insurance Agents & Brokers, and The Brink's Company. Many of these companies already have big stakes in the cannabis industry and stand to profit from federal policy changes.

The coalition also has a “Center of Excellence” made up of experts including cannabis entrepreneur and former president of the Minority Cannabis Business Association Shanita Penny, Staci Gruber of McLean Hospital and Harvard University, Brandy Axdahl of the Foundation for Advancing Alcohol Responsibility, and John Hudak of the Brookings Institution.

A new cannabis coalition made up of a wide variety of national corporations, including tobacco and alcohol firms, launched with the purpose of influencing policy and potentially shaping the first federal cannabis regulations. The group is operating under the premise that federal legalization is inevitable and is enlisting a group of cannabis policy experts to help guide their efforts.

The Coalition for Cannabis Policy, Education, and Regulation plans to focus on federal and state policy discussions. Those policy areas include public safety concerns, youth prevention, minority access to the industry, and national standards on product testing and pesticides. The group plans to compile data and research, and to release white papers on these policy issues that can be used to inform lawmakers.

There are now 16 states that have enacted full marijuana legalization, while 36 have legal medical markets. Senate Majority Leader (D-N.Y.) has embraced marijuana legalization, calling it a priority for this Congress. Meanwhile, the industry is booming — legal sales topped $20 billion last year, according to New Frontier Data, a 50 percent jump over 2019.

The Coalition is working to galvanize support for a comprehensive framework that transcends ideology by bringing together issue experts to generate thoughtful discussion and analysis on various questions surrounding lawmakers as they consider federal cannabis legalization and regulation. Members of the Coalition are experts on diverse issues including regulatory and enforcement structures, state and legacy systems, financing and minority capital access, tax policy, criminal justice reform, social equity, impaired driving, and environmental sustainability.

4. Discussion (Actionable) / Legislation: Paycheck Fairness Act (H.R. 7) (10 minutes: 11:33 a.m. – 11:43 a.m.) Members of this Policy Group will want to discuss the proposed bill and determine how NSBA should weigh in on it. What action does this group think should be taken in regards to H.R. 7? Some in the business community believe this legislation will add significant burdens to small businesses and potentially expose them to frivolous lawsuits.

On March 24, the House Education and Labor Committee approved the Paycheck Fairness Act (H.R. 7), advancing the legislation to the House floor for consideration. President Biden has stated his desire to reduce the pay inequality between men and women. In fact, he has promised to sign the Paycheck Fairness Act during his presidency, and the bill now moves one step closer to enactment. If signed, the Paycheck Fairness Act would make it easier for employees to pursue individual and collective/class actions against their employers, alleging wage discrimination on the basis of race, sex and national origin.

Committee Chairman Robert C. “Bobby” Scott, Rep. Rosa DeLauro (D-Conn.), Chair of the House Appropriations Committee, and Senator (D-Wash.), Chair of the Senate Committee on Health, Education, Labor, and Pensions, led every Democrat in Congress in reintroducing the Paycheck Fairness Act, to help eliminate the gender wage gap, and guarantee that women can challenge pay discrimination and hold employers accountable. The bill previously passed the House in March 2019 but stalled in the Senate.

The Paycheck Fairness Act aims to update and strengthen the and provide additional protections against pay discrimination. Among other provisions, this bill will prohibit employers from relying on salary history to set pay when hiring, guarantee women can receive the same remedies for sex-based pay discrimination as are available for race- or ethnicity-based discrimination, promote pay transparency by protecting employees from retaliation for discussing or disclosing their wages, and require employers to report race and gender wage gaps to the Equal Employment Opportunity Commission.

Specifically, the bill would require employers to show that the factor underlying a pay differential: 1) is not based upon or derived from a sex-based differential in compensation 2) is job-related and consistent with business necessity and 3) accounts for the entire differential in compensation at issue. While it may not be difficult to show that factors such as education or training, which are often cited as a reason for a pay differential, are job-related, it may prove to be more difficult to show that those factors serve an overriding legitimate business purpose that is consistent with business necessity for the particular position at issue. Unlike Title VII sex discrimination claims, the EPA imposes a form of strict liability. The EPA does not require any intent to discriminate. The imposition of a ‘business necessity” defense arguably goes beyond the intent of the law, which is to prohibit sex-based pay discrimination.

In addition, the Paycheck Fairness Act would also make it unlawful to prohibit employees from disclosing or discussing information about their wages, prohibit employers from relying on salary history in setting starting pay, enhance existing prohibitions against retaliation and increase penalties under the federal law.

This bill would also modify existing rules concerning collective actions, potentially making it easier for plaintiffs’ attorneys to mount class action suits by reducing the criteria necessary for employees to join a class. While a potential boon to the trial bar, these changes are likely to result in more frivolous litigation rather than appropriate enforcement against actual gender- based pay discrimination. Employers are also likely to see more aggressive enforcement actions by the Office of Federal Contract Compliance (OFCCP) in the area of compensation. President Biden appointed Jenny Yang to serve as the new OFCCP director. Yang previously served at the Equal Employment Opportunity Commission (EEOC), where she was a strong advocate for pay equity. In addition, federal contractors – and other employers – are likely to see the revitalization of the federal EEO-1 “Component 2” reporting requirement that involved the disclosure of pay data to the government. This initiative was initially implemented by the Obama administration and then discontinued by the Trump administration. While the federal agencies had not, over the past few years, relied on the compensation data that had previously been collected in the EEO-1 filings, it is anticipated that a new approach may take hold under the Biden administration in an effort to search for potential pay discrimination.

5. Update: American Rescue Plan Insurance Subsidies Debut on Exchanges (10 minutes: 11:43 a.m. – 11:53 a.m.) No action is required by this Policy Group, but it should be discussed and watched, because as of April 1, $30 billion in new subsidies over the next two years are beginning to reach eligible individual market consumers who apply through the Exchanges.

The American Rescue Plan (ARP), recently signed into law by President Biden, increases and expands eligibility for Affordable Care Act (ACA) premium subsidies for people enrolled in marketplace health plans. The law also creates new, temporary premium subsidies for COBRA continuation coverage; and it temporarily changes the rules for year-end tax reconciliation of marketplace premium subsidies. The law also made changes to the Medicaid program designed to increase coverage, expand benefits, and adjust federal financing.

Expanded Marketplace Premium Subsidies

Under the ARP, ACA marketplace premium subsidies are substantially enhanced for people at every income level and, for the first time, offered to those with income above 4 times the federal poverty level (FPL).

People up to 150 percent FPL can now get silver plans for zero premium with vastly reduced deductibles. Previously, marketplace premium subsidies were partial; no matter the income level, people had to contribute something toward the cost of the benchmark silver plan (i.e., the second lowest cost silver plan in their area). Those with income at 100 percent FPL had to contribute 2.07 percent of household income ($264 per year in 2021) toward a benchmark plan; at 150 percent FPL that amount increased to 4.14 percent of household income( $792 per year). Now under the ARP, the benchmark marketplace plan will be fully subsidized for people earning up to 150 percent FPL. Cost sharing subsidies were already most generous at this income level (the average silver plan deductible for people at 150 percent FPL is $177 this year). As a result, low income people now can qualify for premium-free silver plans with modest deductibles for covered health benefits.

Premium subsidies will also increase for people at higher income levels among those currently eligible for help with incomes up to 400 percent of the poverty level. Premium tax credits will increase for people at every income level. People with income of 200 percent FPL had been required to contribute $1,664 toward the cost of the benchmark marketplace plan this year; now under the ARP they will have to contribute just $510. At income of 400 percent FPL, people were required to contribute up to $5,017 toward the benchmark plan premium, now they will be required to contribute no more than $4,338 toward that plan.

People with income above 400 percent FPL will be newly eligible for marketplace premium subsidies. Under the ACA, people with income above 400 percent FPL were not eligible for marketplace premium subsidies. Now, they will be required to contribute no more than 8.5 percent of household income toward the benchmark plan. This change will provide limited relief to younger marketplace participants – for example, for 24-year-olds in most areas, the unsubsidized age-rated benchmark plan premium already costs less than 8.5 percent of income for someone at 401 percent FPL – but will offer substantial relief for older individuals, where the unsubsidized premium averages nearly 25 percent of household income for someone at that same income level who is 64 years old. Before this change, when they were ineligible for premium subsidies, some people with income above 400 percent FPL bought their insurance outside of the marketplace, or bought non-ACA compliant plans (such as short term policies). These individuals may want to return to the marketplace where coverage may now be more affordable and more comprehensive. The Biden Administration has reopened marketplace enrollment through May 15.

The ARP premium subsidy enhancements are effective during 2021 and 2022. These changes to marketplace premium subsidies are temporary, in effect only during calendar years 2021 and 2022. The specifics and timeline for implementation of these changes is yet to be determined. However, once implemented, current enrollees may be able to sign into their marketplace account to increase the amount of advanced premium tax credit (APTC) they receive, thereby lowering their monthly health plan premium payment for the remainder of this year. Subsidies for current enrollees are retroactive to the beginning of this calendar year and can also be claimed as tax refunds when people file their 2021 tax return next year.

In HealthCare.gov states, current enrollees will also be able to change plans during the COVID enrollment period, which currently extends through May 15, 2021. People covered in state- based marketplaces should check with their marketplace for information about their ability to change plans as the new premium subsidies are implemented. Presently, some state-based marketplaces offer a COVID enrollment period when only uninsured individuals can sign up.

Enhanced Subsidies for Unemployed People

The ARP provides for enhanced marketplace subsidies for people who receive or are approved to receive unemployment insurance (UI) benefits during any week in 2021. The ARP also extends the current federal supplement ($300 per week) to state UI benefits through September 6, 2021. The federal UI supplement is not taken into account in determining eligibility for Medicaid or CHIP. When UI recipients apply for marketplace subsidies, special rules will be in effect during 2021.

Temporary COBRA Premium Subsidies for 2021

The ARP provides for temporary COBRA premium subsidies for up to 6 months during 2021. Subsidies will cover 100 percent of the monthly cost of COBRA while people are eligible. The law requires the former employer to pay the COBRA premium for subsidy-eligible individuals; the federal government will then reimburse the former employer for this cost.

The COBRA premium subsidies can be paid for coverage months no earlier than April 1, 2021 and no later than September 30, 2021. The subsidy can end earlier than September 30 in some circumstances. It ends when COBRA coverage is exhausted; so for example, someone who first became eligible for COBRA due to a job layoff on March 1, 2020 could continue in that plan for 18 months, or through August 2021. That person could claim the COBRA premium subsidy starting in April 2021, but the subsidy would stop when COBRA exhausts at the end of August. People also lose eligibility for the COBRA premium subsidy once they become eligible for other job-based coverage. If this happens, people must notify their COBRA plan administrator or risk owing a penalty.

The subsidy is for people whose COBRA qualifying event involves termination of employment or reduction in hours worked. People are not eligible for the COBRA subsidy if they quit voluntarily. Nor are they eligible for subsidies if COBRA resulted from other qualifying events, including death of or divorce from the covered employee, the covered employee becoming entitled to Medicare, or loss of dependent child status.

People who became eligible for COBRA earlier in the pandemic can still elect it. Normally, people have up to 60 days from their qualifying event to elect COBRA continuation coverage. During the pandemic, however, people have additional time to elect COBRA, thanks to a COVID disaster relief notice issued by the Departments of Labor and Treasury. Their new COBRA election deadline will be the earlier of (1) one year from the date the person’s election period would otherwise have ended, or (2) 60 days after the announced end of the COVID National Emergency. For example, a person who was laid off early in 2020 and whose deadline for electing COBRA was April 1, 2020 can now take until April 1, 2021 to elect COBRA. Going forward, a person who becomes newly eligible for COBRA can have her election period extended by up to 1 year (or until 60 days following the end of the National Emergency, whichever is earlier.) This emergency rule applies to election of COBRA arising from all qualifying events.

People who became eligible for COBRA earlier in the pandemic can have coverage start prospectively. Normally, once elected, COBRA coverage dates back to the qualifying event and premiums have to be paid retroactive to that point in time. This will remain the rule for subsidy-eligible people whose qualifying event occurs on or after April 1, 2021.

However, under the ARP a special rule applies for subsidy-eligible individuals whose COBRA qualifying event pre-dates enactment of the ARP and who have not yet elected COBRA; or for such individuals if they previously elected COBRA but subsequently discontinued it, and who otherwise remain eligible for COBRA. When these individuals elect COBRA, coverage will commence on the first day of April 2021. Their COBRA coverage will not extend back in time before that date and they will not owe COBRA premiums prior to that date.

Eligible individuals who were already paying for COBRA when the law passed can also claim the subsidy. COBRA premium subsidies are not counted as income to the individual. Subsidies will not affect a person’s tax liability or eligibility for other income-related benefits.

People eligible for COBRA subsidies may also be eligible for marketplace subsidies or Medicaid. Just being eligible for COBRA does not affect a person’s eligibility for marketplace subsidies or Medicaid. Those who have a choice will want to weigh their out of pocket costs (for premiums and cost sharing, net of subsidies), as well as any differences in plan provider networks, covered benefits, and other plan features. Generally, once a person enrolls in COBRA, she won’t have an opportunity to choose marketplace coverage again until the earlier of the next open enrollment period or the date when she exhausts COBRA coverage.

When COBRA premium subsidies end, people can continue unsubsidized enrollment in COBRA. Of course, for many, unsubsidized COBRA may prove unaffordable. Generally, if a person terminates (or stops paying the premium for) COBRA before it exhausts, this loss of coverage does not make a person eligible for a special enrollment period (SEP) in the marketplace.

However, the marketplace has broad authority to recognize new SEP qualifying events. It remains to be seen if HealthCare.gov and state-based marketplaces will recognize termination of COBRA premium subsidies as a qualifying event and allow people the option to switch to more affordable marketplace plans and subsidies at that time.

Other ARP Changes and Affordability

Stimulus payments – The ARP provides for stimulus payments up to $1,400 for qualifying individuals in 2021. These payments are considered tax credits and are not counted as income for purposes of tax liability or eligibility for income-based programs and benefits.

Exemption of UI benefits from federal income tax in 2020 – The ARP also included a provision exempting the first $10,200 in UI benefits paid to an individual in 2020 from inclusion in that individual’s adjusted gross income for that year, which will also lower countable income for the purposes of marketplace premium subsidies. As a result of this change, people who participated in the marketplace in 2020 may find they were eligible for greater premium tax credits than they claimed during the year. If so, people can receive unclaimed 2020 APTC as a refundable tax credit when they file their 2020 federal income tax return. People who already filed their 2020 return before the law was enacted should be able to claim the refund, as well. Next steps

These significant changes to make private coverage more affordable were enacted after many people had already enrolled in 2021 marketplace plans, after HealthCare.gov and state-based marketplaces had announced a time-limited special COVID enrollment opportunity, and after the 2020 tax filing season was underway. It will take time for federal and state agencies to implement these changes, including updates to marketplace subsidy eligibility systems, drafting of model notices, and revision of tax forms.

The Department of Health and Human Services has announced that the enhanced ACA premium subsidies would be available through HealthCare.gov beginning on April 1, but other changes in the ARP may take more time. Under the current special COVID enrollment period, people will have until May 15 to newly sign up for coverage or change plans to take advantage of the additional help.

6. Informational: DOL Guidance on COBRA Subsidy (5 minutes: 11:53 a.m. – 11:58 a.m.) This is for informational purposes only, and does not require any additional action by the Policy Group.

The newly enacted American Rescue Plan Act (ARPA) requires employers to provide subsidized COBRA coverage to employees (and family members) who qualify for COBRA due to an involuntary termination of employment or reduction in hours. Employers are required to offer subsidized COBRA coverage between April 1 and September 30, 2021 (the “Subsidy Period”).

On Wednesday, April 7, the U.S. Department of Labor published a new webpage with resources for employers, advisers, and workers about the COBRA premium assistance under ARPA, including frequently asked questions (FAQs) and model notices.

The DOL guidance is available at: https://www.dol.gov/agencies/ebsa/laws-and- regulations/laws/cobra/premium-subsidy.