This Week in Springfield – 100-32

IN THIS ISSUE:

BUDGET
PHARMACY BENEFIT MANAGER
EQUAL PAY

The House and Senate have adjourned until Monday afternoon but there will be a lot going on this weekend as scheduled adjournment is May 31st.

Budget

A great deal of focus is on a potential budget for the 2019 fiscal year. Last year, a budget that included a $5 billion tax increase was adopted over the veto of Governor Bruce Rauner (R) when 15 House Republicans voted for the override. That budget ended a two-and-a-half year period in which Illinois had no budget. This year, there appears to be a mutual interest in putting place a budget. The alignment appears to come in the form of the Governor wanting a budget so the state continues to operate and the Democrats wanting a budget so social service agencies and schools receive funding. Additionally, both sides seem to want a deal so that no matter who is victorious in November, the winner is not immediately facing a crises upon their inauguration in early January.

While they appear to continue to make progress in discussions, they are scrambling to find sufficient revenue to pay bills, $350 million for schools as required by the education funding bill enacted last year, and $65 million in back wages owed to state workers as a result of the period where there was no budget. Additionally, Democrats have suggested additional spending on certain programs. This has members of both parties looking for additional revenues. However, neither side wants to enact something that has the appearance of a tax increase. While the retail discount, the 1.75% that retailers are allowed to retain as a partial reimbursement for their costs of serving as the sales tax administrator and collector for the state, has been under pressure for several years, given the pressures noted above, the danger has never been greater. IRMA has been working non-stop, including suggesting other alternatives, in an attempt to retain the discount.

We will be in touch with leaders and staff throughout the weekend. We will keep you posted as events warrant but we are not likely to have a definitive answer until any budget that is ultimately agreed to is introduced.

Pharmacy Benefit Managers

An intense debate has been simmering just below the surface for some time now over the State’s transition to managed care for Medicaid and the roles of pharmacy benefit managers. This is particularly true of reimbursements within managed care and the State’s apparent lack of ability to ensure accountability citing the fact the State’s contracts are with the managed care organizations and not the PBMs.  Additionally, there have been historic concerns over certain PBM practices most notably audits.

The House had previously approved HB 3479 (Rep. Sara Feigenholtz, D- Chicago/Sen. Andy Manar, D- Bunker Hill) with the understanding the bill would undergo further revisions in the Senate. As originally passed by the House, HB 3479 would have rewritten the State’s contracts with managed care organizations – a legally dubious proposition – and was estimated to cost the state at least $200 million if enacted.

This week, Senator Manar filed Senate Amendment #5 to HB 3479. This amendment seeks to create State oversight of PBMs by requiring the reporting of specific information to the Illinois Department of Insurance (IDOI) and requiring PBMs to be licensed by IDOI. Additionally, the amendment creates audit protections long-sought by the pharmacy community. Finally, the amendment allows pharmacists to share the contents of their contracts with whomever they choose and would prohibit the practice of forcing pharmacists to accept other contracts in order to participate in one or more other contractual programs. The provisions of Senate Amendment #5 apply to the State’s employee insurance program as well as Medicaid.

The amendment was filed late Friday morning and has not yet been assigned for a hearing. It is anticipated it will be heard early next week in the Senate. If it were to pass the Senate, it would still have to go to the House for concurrence and then the Governor for his consideration. In short, it has a long way to go and a short time to get there.

Equal Pay

Similar legislation that was vetoed by the Governor and failed to be overridden by the Senate last year has once again passed the Senate Labor Committee. Despite an avenue for compromise offered by the business community the advocates chose disagreement. In the meantime additional jurisdictions have passed the compromise offered by the business community.

HB 4163 (Rep. Anna Moeller, D-Elgin/Sen. Christine Castro, D-Elgin) prohibits an employer from asking an employee about previous wage, salary and other compensation. It also limits the current statutory defenses for Illinois employers while expanding the statutory penalties. While IRMA has, from the beginning, agreed to prohibit the question as long as there are common sense exemptions, IRMA remains opposed to arbitrarily restricting Illinois’ employer’s current limited defenses and increasing current statutory penalties.

Illinois currently only has three defenses to an unequal wage claim (1) seniority system; (2) merit system; and (3) a system that measures earnings by quantity or quality of production. The advocates argue that limiting the current defenses and increasing the penalties will deter employers from violating the Equal Pay Act. In the past 11 years (excluding 2010 and 2011 where there is no available data), under the current limited defenses, there have been only 51 recorded violations of the Equal Pay Act. In that same time period approximately 707 investigations were conducted by the Illinois Department of Labor. Less than 7.5% of all claims in the last 11 years have resulted in a violation. According to the U.S. Small Business Administration there are over 1.2 million businesses in Illinois. Assuming that a different company was responsible for each violation only .0000425% of Illinois businesses have been responsible for an Equal Pay Act violation in 11 years. This is a 99.9999575% compliance rate.

Despite this compliance rate some business associations are willing to take a proactive step to support expanding the current Equal Pay Act to prohibit an employer from asking about a prospective employee’s wage and salary. A year ago, these associations suggested using a compromise that was accepted by all parties in Massachusetts that included an affirmative defense for employers. Since that time, Oregon, Delaware, California, and Puerto Rico have passed legislation prohibiting asking about an employee’s previous wage and salary. Oregon and Puerto Rico have adopted the Massachusetts model. So three of the five major jurisdictions support a compromise model. Additionally, this model has been introduced in Rhode Island, Connecticut, Montana, Georgia, and Texas. Despite over 700 investigations over the past 11 years of available data 99.99% of all Illinois employers have already proven to be compliant with the current law.

HB 4163 now awaits consideration by the full Senate.