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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

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With the state budget completed, the Michigan House of Representatives virtually adjourned for the summer, only scheduling three days in July and three days in August in which to be in session.&nbsp; The Senate, on the other hand, had scheduled session days throughout the summer in an effort to devise and put forward a plan for funding the State’s crumbling roads and infrastructure.&nbsp; Whether or not it takes the entire summer to develop a compromise between the House and Senate remains to be seen.&nbsp; Otherwise, both Houses swing back into regular session after Labor Day.

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On May 5, the voters resoundingly defeated a complicated ballot proposal which would have raised the sales tax from six to seven percent, increased wholesale fuel taxes, guaranteed funding for K-12 education and local government, and ensured in law the earned income tax credit for the working poor.&nbsp; The proposal was placed on the ballot by the Legislature just prior to the end of the year and from that day until election day, polling consistently showed it was dead on arrival.&nbsp; By 9:00 p.m. on the night of May 5, it was clear the proposal was going down.&nbsp; By the end of the evening the proposal was defeated by a vote of approximately 80 to 20 percent.&nbsp; Political pundits were quick to point to the proposal’s lengthy and complicated language for its downfall.&nbsp; Others said the voters weren’t convinced the Legislature had exhausted all possibilities before going to them for a tax increase.&nbsp; Whatever the reason, the Legislature heard the voters loud and clear.&nbsp; The House Republican Majority proposed its plan in late May.&nbsp; It is a plan that dedicates over $1 billion annually toward roads and infrastructure improvements but only raises one tax – that being the tax on diesel fuel, which was raised to be equal with the tax levied on gasoline.&nbsp; The House GOP plan also raises registration fees, especially the registration fee levied on electronic cars.&nbsp; However, the backbone of the plan relies on economic growth and large transfers of funds from the Economic Development Corporation and the film credit program.&nbsp; House Republicans then passed their plan, sent it to the Senate and announced that, unlike the Senate, it did not have to meet over the summer because it had completed the work the voters wanted.

The Senate, on the other hand, had announced just after the disastrous ballot proposal defeat that it would take a more deliberate approach to the road funding solution by meeting the entire summer.&nbsp; The majority Senate Republicans had assigned certain members of their Caucus to look for cuts to help fund a plan while other members are looking at possible revenue alternatives.&nbsp;

Just prior to the July 4th holiday, Senate Republicans unveiled and eventually passed their own comprehensive road funding plan.&nbsp; Contrary to its House counterpart, the Senate plan proposes to raise gasoline and diesel fuel taxes.&nbsp; However, the increased revenue obtained through additional taxes would be offset by dedicating $700 million existing general fund dollars to roads.&nbsp; Once fully implemented, the bill package generates $1.4 billion for road funding.&nbsp; Highlights of the proposal include:

In order to assuage the concerns of several members of the Republican Caucus about voting to raise the tax on fuel, leadership put forward a proposal which could roll back the income tax rate.&nbsp; According to SB 414, if it is determined at the January Revenue Estimating Conference that the State’s growth in general fund revenue is greater than the rate of inflation, then the income tax rate could be adjusted downward one-tenth of a percentage point for every $230 million the State’s general fund is earning over the rate of inflation.&nbsp; Michigan’s current income tax rate is 4.25 percent.

Any funding formula will have to be perceived as being revenue neutral.&nbsp; It must be remembered that several current Republican House members would like to continue their careers in Lansing by serving in the State Senate.&nbsp; In fact, in 2018 there will be 19 open seats that are currently held by Republicans.&nbsp; It would behoove any ambitious Republican House member to think seriously about voting for any tax increase, especially before heading into a GOP Primary Election.&nbsp; Look for some action this summer to reconcile House and Senate versions.

For the fifth year in a row, the Legislature presented a budget to the Governor in June and on June 18 the Governor signed both omnibus bills funding departments of State government and the K-12 and Higher Education omnibus bill.&nbsp; Total State funding for FY 2015-2016 is over $54 billion gross and $8 billion general fund.&nbsp; By far, the largest budget is that of the Department of Health and Human Services (DHHS), formerly the Departments of Community Health and Human Services.&nbsp; That new combined department accounts for approximately 46 percent of all State spending, excluding K-12 and Higher Education, and it includes the administration of the Medicaid and Medicaid expansion programs.&nbsp; The FY 2015-2016 DHHS budget appropriates over $19.5 billion gross and $3.2 billion general fund.

By Executive Order 2015-4, Governor Rick Snyder combined the Departments of Community Health (DCH) and Human Services into the Department of Health and Human Services.&nbsp; The new Department is responsible for the administration of the State’s Medicaid and Medicaid expansion programs as well as a myriad of children and foster care programs.&nbsp; Former DCH Director Nick Lyon was appointed by the Governor to head the new Department.

Retiring Medicaid Director Steve Fitton’s last day was June 18.&nbsp; Fitton was instrumental in launching the State’s Medicaid expansion program and was guiding the State in its negotiations with the Centers for Medicare and Medicaid Services (CMS) toward a second crucial federal waiver for the program.&nbsp; Replacing Fitton as Acting Director of Medicaid is Kathy Stiffler, who has directed the Quality Assurance Division within Medicaid.

As a condition for the continued existence of Medicaid expansion in Michigan, the State must receive waivers from CMS for a couple of conditions the Legislature placed in statute.&nbsp; The first waiver allowing enrollee cost sharing and wellness was granted by CMS.&nbsp; The second waiver involves the cost of Medicaid expansion insurance premiums and copays as a percentage of one’s income once the person has been enrolled in the program for 48 months.&nbsp; After a period of 48 months, an enrollee’s cost for premium and copays would jump to up to seven percent of income.&nbsp; Thus far, CMS has not granted a waiver request involving anything greater than five percent of income.&nbsp; The underlying State statute, which created the expanded program, required that a second waiver request from DHHS to CMS be submitted by September 1 of this year and that CMS must decide favorably on the waiver application by the end of this year.&nbsp; Negotiations have been ongoing between Department officials and officials at CMS.&nbsp; What was once not a very optimistic outlook appears to be looking better as September 1 gets closer.

PHARMACY BENEFIT:&nbsp; CARVE OUT THEN CARVE IN

In February, the Governor proposed the realization of over $18 million general fund dollars by taking the administration of the Medicaid pharmacy benefit completely from health plans, often called a “carve out” and having it run by the Department’s pharmacy benefit manager.&nbsp; Such a move was contrary to what most states had been doing, but the Department wanted the revenue from supplemental pharmaceutical rebates.&nbsp; In addition, the Department claimed that with 13 Medicaid health plans, there were 13 different formularies adding to the cost and administration for providers participating in the program.&nbsp; Due to intense lobbying effort, the health plans won back the pharmacy benefit, but at a cost.&nbsp; Namely, the Plans had to underwrite the Department’s anticipated savings by either assigning the supplemental rebates to the Department or through a rate reduction or both.&nbsp; In addition, health plans are required to develop a consensus formulary that meets with the Department’s approval.&nbsp; This requirement was mandated in the FY 2015-2016 budget legislation.&nbsp; For now at least, administration of specialized drugs prescribed for the treatment of mental health conditions, cancer, organ transplants and HIV will stay with the Department, but talks will take place as to the feasibility of carving these drugs into health plan administration as well.

A bill that allows a pharmacist to substitute a brand name with an “interchangeable biological drug product” was introduced and has been referred to the House Health Policy Committee.&nbsp; An interchangeable drug product is defined as “a biological drug product that has met the safety standards for determining interchangeability under 42 USC 262 and is therefore determined to be interchangeable with a reference product by the FDA.”&nbsp; The bill specifically adds an interchangeable drug product to a generically equivalent drug product as a substitution alternative to a brand name drug if either alternative is less expensive than the brand name.&nbsp; Look for a hearing on the bill this fall.

A bill that would have greatly expanded the scope of practice for those recognized as Advanced Practice Registered Nurses (APRN) received several hearings, was significantly altered and remains stalled on the Senate Floor.&nbsp; As introduced, SB 68 defined a scope of practice for nurse midwives, nurse practitioners and clinical nurses (APRNs) allowing them to engage in much of the practice of medicine.&nbsp; APRNs would be allowed independent authority to prescribe drugs, conduct diagnostic testing such as unlimited imaging and treat patients.&nbsp; As expected, the physician community was vehemently opposed.&nbsp; A few days prior to a Senate Health Policy Committee vote, the bill was substituted for one removing an APRN’s ability to practice independent from a physician’s supervision, to conduct unlimited imaging tests and prescriptive authority.&nbsp; This new version of the bill was seen as a positive step by the physician community and, as such, their position changed from one of opposition to neutrality.&nbsp; The affected nursing groups, on the other hand, ended up opposing the substitute which may explain the reason why it remains on the Senate Floor.

SB 320 would allow a registered nurse who holds a specialty certification as a nurse anesthetist to order and prescribe anesthesia and anesthesia services and to administer the same independent of a physician’s supervision.&nbsp; The bill has been referred to the Senate Health Policy Committee.

SB 383 and HB 4598 license nurse midwives and allow them to practice independent of a physician as long as that practice was consistent with their training and does not include the practice of medicine.&nbsp; Both bills have been referred to the Health Policy Committee of their Chamber.

HB 4712 allows chiropractors to prescribe treatment by a licensed physical therapist.&nbsp; Currently, only a physician, a podiatrist or a dentist can prescribe physical therapy.&nbsp; There was a hearing on this bill earlier this spring before the House Health Policy Committee, at which time the chiropractors endorsed the legislation while the physical therapists, health insurers and major employers opposed.&nbsp; The bill remains in Committee.

SB 150 would require health insurers and health plans that provide pharmaceutical coverage to allow pharmacists to synchronize multiple prescriptions and obtain reimbursement for the same.&nbsp; The bill has been reported from the Senate Insurance Committee and is now on the Senate Floor.

SB 212 provides for the licensure of genetic counselors and defines the scope of practice.&nbsp; The bill was introduced in March and remains with the Senate Committee on Health Policy.

In anticipation of the U.S. Supreme Court deciding that same sex marriage is a constitutionally protected right, legislation was introduced and one bill was enacted asserting the ability to deny a service based upon religious convictions.

HBs 4188, 4189 and 4190, now Public Acts 53, 54 and 55 of 2015, allow faith-based adoption organizations to refuse to seek services when the conduct of the couple conflicts with its sincerely held religious beliefs.&nbsp; However, an amendment was added requiring the declining organization to refer applicants to an agency that is willing to provide services or promptly refer the applicant to a website listing adoption agencies.&nbsp; Opponents of the legislation argued it would leave many children without homes and that an organization, especially a faith-based organization receiving tax dollars, should not discriminate based on sexual orientation.&nbsp; Supporters argued that requiring faith-based organizations to do things that conflict with their beliefs is a suppression of their freedom to exercise their religion, a violation of a First Amendment right.&nbsp; Moreover, it is argued, requiring faith-based organizations to participate in activities which violate their beliefs will eventually lead to these organizations closing, resulting in fewer placements of children.&nbsp; On a nearly partisan vote, the bills passed both Houses and the Governor eventually signed them into law.&nbsp; A court action challenging the constitutionality of the statutes is soon expected.

HB 4309 allows a health care facility to assert as a matter of conscience an objection to participating in a health care service that violates its conscience.&nbsp; The health care facility would have to give advance notice of what was objectionable.&nbsp; The bill has been referred to the House Health Policy Committee.

REVISION OF RESIDENTIAL CONSTRUCTION CODE

The Bureau of Construction Codes (BCC) within the Department of Licensing and Regulatory Affairs (LARA) is in the process of revising aspects of the State Construction Code.&nbsp; BCC and LARA are given that authority by statute.&nbsp; Latest to be in the process for revision is the Residential Construction Code.

One of the provisions in the current Code that LARA/BCC want deleted is the mandate for installation of arc fault circuit interrupters (AFCI) for bedroom circuits in new construction.&nbsp; AFCIs were developed by Underwriter Laboratories and are designed to sense arcs and faults in wiring which can lead to electrical fires.&nbsp; AFCIs are designed to shut off a circuit upon detection of faulty wiring.

LARA/BCC, supported by the Home Builders Association of Michigan, say there is no data to justify requiring arc fault installation.&nbsp; Moreover, they say it is a needless expense added on to the cost of a home.&nbsp; On the other hand, proponents of retaining AFCIs in the Code have the support of fire chiefs and marshals, building inspectors, burn victims, property and casualty insurers and the National Fire Prevention Association.&nbsp; The average cost of an AFCI is $40 per circuit.&nbsp; Moreover, AFCIs are currently required in some capacity in 49 of the 50 state codes.

A public hearing was held on May 28 with approximately 20 witnesses urging inclusion of AFCIs in the Revised Code.&nbsp; The only group testifying against inclusion was the home builders.&nbsp; The revisions minus the AFCI requirement were scheduled for a hearing before the Legislature’s Joint Committee on Administrative Rules (JCAR) on June 17, but that meeting was cancelled because legislators are concerned about the consequences of not mandating AFCIs in the Code.&nbsp; In fact, there is now some momentum for legislation mandating AFCI installation.&nbsp; According to the Administrative Procedures Act (APA), JCAR has 15 session days in which to counter this revision by way of legislation.&nbsp; A session day is defined in the APA as a day in which both the House and Senate are in session.&nbsp; As of now, there are only 6 days this summer in which both Houses are scheduled to be in session simultaneously.&nbsp; Consequently, JCAR may have until after Labor Day to initiate legislation and get it passed by both Houses.

In that event, the real question would be whether the Governor would sign a bill that is contrary to the wishes of one of his departments.&nbsp;

REVAMPING THE ENERGY LAW:&nbsp; WILL SOMETHING GET DONE OR ARE WE AT A STANDSTILL?

One of the biggest issues facing lawmakers this session is whether to keep the “energy choice” policy that mandates 10 percent of the market to consist of alternative electric suppliers.&nbsp; Large utilities have argued that the system has been a failure, but advocates say there is a need for alternative sources in light of the yet to be released emission standards from the U.S. EPA, which is expected to mean that some power plants will have to close.

The large utilities pointed to an anticipated power shortage and the fact that there would be plant closures due to the anticipated EPA regulations.

However, recently the Midcontinent Independent System Operation (MISO), which oversees transmission of electric power in this region of the country, released a survey indicating there may not be an electric shortage as the large utilities claim.&nbsp; The survey, conducted this year by MISO, actually shows a regional surplus for 2016 due to an increase in committed resources along with a decrease in load demand.&nbsp; The large utilities contend that Michigan is the most stressed region in the Midwest for electricity and the need has to be addressed.

Two large groups representing opposite points of view are going head-to-head on the issue.&nbsp; Energy Choice Now is a group promoting the continuation and even expansion of alternative energy sources such as wind and solar energy.&nbsp; Its antagonist is “Citizens for Michigan’s Energy Future” which seeks to limit choice and alternatives.

There will be two proposals on the issue of choice, one each coming from the Chairs of the House and Senate Energy Policy Committee.&nbsp; The House alternative, a package of bills advocated by Chair Aric Nesbitt (R-Lawton), among other things:

These bills, HBs 4298-4302, have received a number of hearings before the Energy Policy Committee but remain there because there is not enough support to move them to the Floor.

Sen. Mike Nofs (R-Battle Creek), the Chair of the Senate Energy and Technology Committee, has said that he was waiting for the budget process to end to begin discussions on legislation he will introduce.&nbsp;

Recently he rolled out his much anticipated proposal embodied in SB 437, which calls for removing mandates on renewables and revising Michigan’s integrated resource planning (IRP) process.&nbsp; Under the Nofs plan, utilities would be required to submit IRPs for clean emission goals for its power plants at various times before the Public Service Commission.&nbsp; The plan also keeps the 10 percent electric choice cap while the House plan seeks to phase it out.&nbsp; Environmental groups such as the Michigan Environmental Council are disappointed with the package, especially the elimination of the renewable energy mandate.

One of the big complaints of businesses that have a statewide presence is the patchwork of local ordinances, policies, rules and regulations regarding working conditions.&nbsp; The ordinances among municipalities could be quite different.&nbsp; HB 4052 was introduced to address that situation.&nbsp; This bill was a toned down version of a bill that died last session.&nbsp; It prohibits a local government from, among other things, adopting or enforcing an ordinance, local policy or local resolution that:

The bill passed both Houses in substituted form, was presented to the Governor on June 22 and is now Public Act 105 of 2015.

For the past two legislative sessions auto insurers have been pushing legislation to place a cap on the unlimited personal injury protection (PIP) benefits.&nbsp; Last session, the legislation died because not enough Republicans were willing to vote contrary to the wishes of some major hospitals that opposed revision and also may have been the major employer in the lawmaker’s district.<br>This year, the fight resumed almost as soon as the new session began, SBs 248 and 249 were originally introduced to set limits on PIP benefits, but in order to obtain support the limit on PIP was dropped and, instead, a fee schedule that was tied to the workers compensation rate schedule was passed and sent to the House.&nbsp; Once in the House, the Insurance Committee made a number of changes.&nbsp; Among those changes was revision of the rate schedule to 150 percent of the Medicare rate for reimbursement.&nbsp; Even though the bills were sent to the House Floor, they have been stalled there since April, lacking the support of enough Republicans for passage.

These bills remain on the House Floor while backers search for more votes for passage.&nbsp; Meantime, another bill applying limitations on PIP benefits just for the City of Detroit was beginning to gain support.&nbsp; The bill, SB 288, is aimed at making auto insurance more affordable in the City of Detroit, which for years has had the highest rates in the State.&nbsp; The bill would, among other things:

The bill had been championed by Detroit Mayor Mike Dugan and sponsored and/or supported by members of the Detroit Senate delegation.&nbsp; With that support, the bill was reported from the Senate Insurance Committee to the Floor.&nbsp; However, like its much broader cousin, SB 248, this legislation now appears stalled on the Floor for lack of support.

Less than a year away from Michigan’s Presidential Primary and just over a year away from the State’s August Primary Election, sides are already starting to take shape.&nbsp; Michigan will have no Gubernatorial, Senate or Supreme Court races in 2016 so the interest will be heightened for the Presidential Congressional and State House of Representatives races.

The Michigan Presidential primary will be held on March 8, 2016.&nbsp; At this point, it is very difficult to determine which of the myriad GOP candidates will still be in the race, but if Jeb Bush, Marco Rubio and Scott Walker are still in, it will be hard to count them out of this primary.&nbsp; For the Democrats, the Party establishment will be backing the overwhelming favorite, Hillary Clinton, and she should be a heavy favorite.

As for the General Election, the Democratic Presidential candidate has won Michigan’s electoral votes the last six times and that fact may spur the Republicans to again look into changing that through legislation.&nbsp; Michigan, like 47 other states, has a winner take all electoral college voting system.&nbsp; The winner of the popular vote takes all of the electoral votes and that is true even if the winning candidate carried fewer congressional districts than the loser.&nbsp; Last session, House Republicans investigated changing whom Michigan awards its electoral college votes from a winner take all to a proportionate system.&nbsp; One Republican plan if enacted prior to 2012 would have given former Massachusetts Governor Mitt Romney more of Michigan electoral votes than President Obama even though the latter carried the state by approximately 450,000 votes.&nbsp; The Republicans may try to initiate legislation before the end of this year, but Governor Snyder has indicated he is cool to the idea.

The partisan split in the Michigan congressional delegation stands at nine Republicans and five Democrats.&nbsp;&nbsp; The huge GOP victory of 2010 allowed Legislative Republicans to draw a majority of districts with a very favorable GOP base.&nbsp; Moreover, of the 14 congressional districts, only two, both held by Republicans, could be considered marginal, having a base Republican strength of 53 percent.&nbsp; Those seats are held by Congressman Dan Benishek in the 1st District (Upper Peninsula, Northern Lower Peninsula), and the 7th District (four counties—bordering Ohio and Indiana and Washtenaw, Eaton and Jackson) held by Congressman Tim Walberg.&nbsp; Already Democrats are mounting an offensive in these two districts in the hope that the last several cycles of Democrats doing well in a Presidential election year continues.

In the 7th District, State Representative Gretchen Driskell is making an aggressive attempt to unseat Walberg.&nbsp; In the 1st District, Michigan Democratic Party Chair Lon Johnson resigned his post to take on Benishek.&nbsp; Another potential Democratic candidate in the 1st District is 2014 nominee Jerry Cannon, who waged a strong campaign.

What few gains House Democrats made in 2012 they lost in 2014.&nbsp; The Republicans hold a 63-46-1 majority.&nbsp; Nevertheless, the Democrats are optimistic about their chances of gaining the majority back in 2016.&nbsp; First, there will not be the competition for limited funds among Party candidates.&nbsp; Other than the Presidential and congressional races, House Democrats’ efforts to regain that Chamber will be one of the main focuses of the faithful.&nbsp; Second, of the 40 representatives serving their last term due to term limits, 27 are Republicans and while several of these seats are in statistically safe Republican districts, it still is more difficult to defend an open seat, especially for Republicans in a Presidential year.&nbsp; Third, the Democrats lost some seats in 2014 by very narrow margins and there are districts that are either statistically Democratic, or marginal, that have elected the Republican incumbent due to personality rather than philosophy.&nbsp; The race for control of the State House of Representatives will be spirited.

Senior Counsel

James G. “Jim” Cavanagh

Government Advocacy and Affairs

From the Capitol – July 2015

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From the Capitol – July 2015

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