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A Better Partnership


Dec 2012
December 19, 2012

From the Capitol - 2012 in Review


The Michigan Legislature completed its “lame duck” session last week amid controversy and protests, which was a fitting climax to a very productive two years.

In this legislative session, the Governor and Legislature transformed the Michigan Business Tax, unemployment compensation requirements, education accountability and accountability for local government financial management; reformed the public employee health care and retirement benefits system; reduced regulations; converted Blue Cross & Blue Shield of Michigan (BCBS/M) to a mutual company, and, on the last day of session, enacted a phase-out of the industrial personal property tax.

However, the biggest victory for conservative Republicans was the Governor’s consent to make Michigan a right-to-work state. Even under this GOP Governor and this Republican legislature, that change was unthinkable a month ago.

Right-to-Work Realities:

Yes, Michigan, known as the birthplace of the modern American labor movement stretching back over 75 years, is now the 24th right-to-work state.

On Dec. 11, 2012, Governor Snyder signed the bills, now known as Public Acts 348 and 349 of 2012, into law. Since the legislation failed to obtain the necessary two-thirds vote for immediate effect, the effective date, by state constitutional requirement, will be 90 days from the official end of this session, which is December 27.

Opponents of the legislation will not be able to conduct a referendum on it. That’s because the Legislature appropriated funds within the body of the bills to implement and administer the laws.

Adding an appropriation to a bill that otherwise only deals with policy is becoming more common, especially when the bill is controversial. This has been occurring ever since the Michigan Supreme Court ruled in 2001 that any law containing an appropriation for a state institution was not subject to the people’s constitutional right of referendum. Up until that point, only bills that appropriated funds for entire departments were not subject to referendum. It has now become commonplace for controversial legislation to include an appropriation.

Opponents of the legislation will, however, likely challenge it in the Court of Appeals, which was given original jurisdiction. Some of the arguments include:
  • At least one of the bills — the one dealing with public employees — changed its purpose as it wended its way through the Legislature, which is a violation of  the state constitution
  • By exempting police and firefighter unions from the right-to-work mandate for public employees, the law violates the equal protection clause of the 14th Amendment to the U.S. Constitution
In addition, the Chair of the Michigan Civil Service Commission recently said the legislation does not apply to unions representing classified state civil service employees. By way of article 11, section 5 of the state constitution, the Civil Service Commission, not the Legislature, has authority over conditions of employment within civil service, he said.

The Chair also stated the Commission is not at this time of a mind to impose the right-to-work mandates for state employees and the unions that represent them. The Attorney General disagrees and has said he expects the Commission to follow the law. So, there may be a legal showdown on this front as well.

Blue Cross & Blue Shield's Conversion:

Legislation that converts Blue Cross & Blue Shield of Michigan (BCBS/M) from a benevolent public trust to a non-profit mutual insurance company won approval from both the House and Senate. The Snyder Administration and BCBS/M made passage of conversion legislation a priority. Under the federal Affordable Care Act, the social mission of insurers of last resort will expire as of January 1, 2014, because all health insurers will be required to “guarantee issue” policies to applicants.

The final version of SBs 1293 and 1294 call for, among other things:
  • A contribution by BCBS/M over a period of no less than 18 years of $1.5 billion to an as-yet-to-be-created tax-exempt charitable foundation whose purpose will be to assist children and seniors with the cost of health care
  • Relinquishing the state tax-exempt status of BCBS/M, estimated to be approximately $100 million
  • As of January 1, 2014, a ban on “most favored nation” (MFN) contract clauses between insurers and providers
  • Ratcheting down on the practice of cost shifting the price of undercompensated care through government programs like Medicare and Medicaid to other insurers
  • A requirement that BCBS/M pay an additional $120 million over five years toward a Medigap subsidy after the current agreement with the Attorney General expires
Competitor health plans and insurance companies were pleased to see certain language in the legislation, such as a ban on MFNs and cost shifting in order to level the playing field for a carrier that controls 70% of the commercial market.  However, seniors and disability groups, most notably the American Association of Retired Persons, thought the Medigap subsidies were too low and did not include the disabled. The Consumers Union believes a valuation should take place and the $1.5 billion payment is far too low, given the true assets of BCBS/M.  Nevertheless, the Governor is expected to sign both SB 1293 and 1294 before the end of the month.

Personal Property Tax Phased Out:

Senate Bills 1065-1072 would have phased out the personal property tax for industrial property and for commercial property having a taxable value of $40,000 or less. This proposal fell short of what local governments wanted, which was a constitutional guarantee of reimbursement, but at least this package offered some assurance of reimbursement through a commitment toward future appropriations for that purpose. For according to the Senate passed version, if a future Legislature did not make an appropriation for distribution to local governments for any shortfall in revenue due to repeal of the tax, the personal property tax would be reinstated.

Recently, the Lt. Governor promoted a new measure, reported in the last edition of From the Capitol. That proposal offered reimbursement to local governments for lost revenue, but reimbursement would require voter approval of a constitutional amendment. A very “iffy” proposition, at best.

As anticipated, local governments opposed the Lt. Governor’s plan because of the uncertainty over whether a ballot proposal would pass. The lobbying was fast and furious in lame duck session with local government officials testifying against the proposal. Undaunted, the House Tax Policy Committee, by a partisan vote, moved the Lt. Governor’s plan to the full House.

On the last day of session, it appeared that the Lt. Governor’s plan was doomed. It was too complicated for legislators to understand in such a short period of time. Besides, lawmakers were getting pressure from their local governments to oppose the package. Faced with the possibility of defeat, several House Republicans threatened to pursue an outright repeal of the personal property tax with no reimbursement to local government. Period.

When it appeared there may have been the votes for an outright repeal, representatives of local government concerns were given just a few hours to try to save the Lt. Governor’s plan. In the end, the Lt. Governor’s plan prevailed, giving local governments at least a fighting chance for reimbursement for lost revenue by taking their case to the voters.

Health Care Exchange Bill Dies:

An attempt by the House Health Policy Committee to report to the full House a bill calling for a state-operated health care insurance exchange failed when most Republican members voted “no.”  SB 693, which passed the Senate last year, would have established the MIHealth Marketplace health care insurance exchange.  An exchange, whether operated by the state or federal government, is mandated by the federal Affordable Care Act (ACA), commonly known as “Obamacare.”

Governor Snyder had endorsed the concept, saying it would be good for the health insurance marketplace, whether mandated by the ACA or not. Opponents who also adamantly oppose the ACA saw the establishment of an exchange as an approval or ratification of the federal law. In the end, rejection of a state operated exchange prompted the Snyder Administration to apply to the federal government for a federal-state partnership to operate the exchange.
Two Medical Malpractice Revisions Advance:

On the last day of session, the Legislature enacted two bills (SB 1115 and 1118) out of an original package of four, meant to revise and reform medical malpractice law. The Governor is expected to sign both of them.

Senate Bill 1115 requires, among other things, that:
  • Past and future economic damages and future health-care costs be reduced by collateral source payments
  • The total judgment amount would have to be reduced by the amount of all settlements paid by all joint tort feasors and by the percentage of the plaintiff’s fault
Senate Bill 1118 limits the time period for bringing a medical malpractice action on behalf of a decedent and prohibits prejudgment interest on costs and attorney fees awarded in medical malpractice actions.

The other two bills in the package could not garner enough support for passage. They would have established the “physician judgment rule” as the new standard of care in medical malpractice actions and would have allowed for a civil action for malpractice against a person holding himself or herself out as a member of a licensed profession.

Emergency Managers are Back:

Five weeks after Public Act 4 of 2011, the emergency manager law, was repealed by the voters, the Legislature enacted its first cousin, embodied in SB 865.  The previous law had been widely criticized as disregarding local control, disenfranchising the will of the people and overturning contracts that were the product of collective bargaining. It said that a local unit of government found to be in a financial crisis had the choice of entering into a consent agreement with the state in order to achieve financial solvency or having an emergency manager appointed by the Governor in order to right the ship.

Due to a well-organized petition drive assisted by local governments and public employee unions, Public Act 4 of 2011 was placed on the November ballot for the voters to either accept or reject, through the electorate’s constitutional right of referendum.  While it was a fairly close vote, the law was, in fact,  repealed by a margin of 52-48%.

With the voters having spoken, we reverted back to a watered-down law enacted in the early 1990s. Enter the Legislature and lame duck session. SB 865 differs from the repealed legislation in that it gives a local government more choices in the event of a financial crisis, namely entering into a consent agreement with the state, submitting to mediation, agreeing to the appointment of an emergency manager or declaring and filing for bankruptcy.

Opponents objected, citing the fact that a similar law had just been repealed by the people.  Proponents argued that SB 865 really was different because it gave local governments more choice in how to become solvent.

In the end, the proponents, most of whom are members of the Republican majority in both Houses, prevailed and passed the bill on the second-to-last day of the session.

Oh yes — like the right-to-work legislation, the majority GOP added an appropriation within the body of the bill. They made sure this new bill could not be repealed by the people, as was its predecessor,

‘No’ to Education Authority:

Companion bills (HB 6004 and SB 1358) called for the codification of an Education Achievement Authority (EAA). The concept is not new. Eastern Michigan University operates this type of program with the Detroit Public School System.

The legislation called for a statewide school district consisting of schools that rate in the bottom 5% in achievement for 3 years in a row. A school could not be removed from the “district until it met certain achievement levels and broke through the worst-5%-of-schools barrier.

Bill sponsors, staff and interested parties put a great deal of work into the bills, especially during lame duck session. The main concerns involved the district not being required to follow the same laws and regulations as other school districts in the state and the qualifications of the district’s teachers. In the end, time ran out, but look for sponsors to reintroduce the bills in 2013.

Abortion Foes Get Big Win:

A bill that has been pursued by Right to Life groups for years will probably become law in the near future. The Legislature, over strong objections from pro-choice groups, passed a substitute for HB 5711. Among other things, the bill says:
  • A physician must screen a patient to determine if the woman is being coerced into having an abortion
  • A facility in which abortions are conducted must post information about coercion
  • A physician who performs abortions must submit information on coercion to abort at least 24 hours prior to the procedure
  • The physician must be physically present at the time of the abortion
  • The physician who performs abortions must carry at least $1 million in medical malpractice insurance
The bill also imposes several requirements regarding disposal of fetal remains. The Governor is expected to sign the bill.

Lighting and Transit Authority Become a Reality:

Detroit Mayor Dave Bing has been seeking to alleviate the city’s fiscal problems.  One small piece to that puzzle, but still a burdensome one, is the city’s responsibility for public lighting for roadways and sidewalks. Detroit’s lighting infrastructure is old and in disrepair and funding for upgrades is totally beyond its means.

A package of 3 bills (HB 5688, HB 5705 and SB 970) allows for the creation of a lighting authority with a governing board, requires certain annual payments to the authority from the city and requires that the city’s increased property tax revenue be dedicated to the authority.

The measure split Detroit legislators between those who wanted the city to continue to control what they believe to be their own matters versus those who wanted a more efficient and effective body to make the streets safer. In the end, the bills passed and the Governor is expected to sign them.

Finally, RTA for Southeast Michigan:

A package of bills (SBs 909, 911, 912, 967 and 445) to create a Regional Transit Authority, dedicate certain fees to the Authority and allow the Authority to enter into agreements with the Department of Transportation and local governments, was finally enacted after many attempts by previous legislatures to do so.

The new Authority will be governed by 10 people, with two members each from the counties of Wayne, Oakland, Macomb and Washtenaw, one representative from the City of Detroit and one non-voting member appointed by the Governor. The Authority’s board will have the power to borrow money and issue bonds and notes, enter into contracts and charge fees.  SB 909 also authorizes the Authority to plan, design, construct and operate a rolling rapids transit system on at least four corridors of the public transit system or area.

Governor Vetoes CCW Bill:

Late on the last night of session, the Legislature passed SB 59, which would have allowed citizens with additional firearms training to carry concealed firearms in places open to the public, such as churches, schools and day care centers. The bill has an opt-out provision for privately owned entities that want to be gun-free zones, but there was no opt-out provision for publicly owned places of assembly, which includes public schools.

After dozens were killed in a school massacre in Connecticut last week and because public schools, public day care centers or public hospitals do not have an opt-out clause under the bill, the Governor vetoed it this week.

No Movement on No-Fault Auto Insurance:

Still facing resistance from a rather unique political alliance, revisions to Michigan’s no-fault auto insurance law died on the House floor. HB 4936 would have eliminated Michigan’s unlimited benefits for injury and rehabilitation, known as personal injury protection (PIP) insurance. Instead, the bill would have allowed an insured to choose his/her PIP limit among three options: $500,000, $1 million or $5 million.

The unique alliance of physicians, much of the health-care industry and plaintiff’s attorneys vehemently opposed the legislation, saying that with the rising cost of health care, more people would face personal bankruptcy and ultimately have to rely on Medicaid for care once their benefits had been exhausted. Insurers argued that the cost of health care is driving up the insurance premiums paid by their customers.  In addition, unlimited PIP was making Michigan far less competitive for the industry than other states.

In the end, the industry could not muster enough GOP votes to get it off the floor of the House.  The insurance industry vowed to try again next year.

Nurses' Legislation Dies for Now:

Senate Bill 481, sponsored by Sen. Mark Jansen (R-Grand Rapids), would have statutorily recognized the specialties of nurse practitioner, nurse midwife and clinical nurse specialist. It also would have allowed these nurses to practice independently, without the collaboration and supervision of a physician and to greatly expand the scope of practice for a nurse practitioner. Physician groups opposed this legislation because it would have allowed advanced practice registered nurses to practice independently of a physician and greatly expand their scope of practice.

Due in large measure to opposition from the physician community and business groups, the bill will die this session. However, the bill’s sponsor says he will introduce it again in 2013 and expects a compromise agreement with APRNs by spring.

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