Daily Fantasy Sports Legislation

By Danny Restivo

The word “fantasy” may elicit images of children’s games, but in the sports world it has become synonymous with profit. For the past decade, fantasy sports leagues for football, baseball, basketball and hockey have generated $3 billion in annual revenue. Since 1988, fantasy sports participation has grown exponentially, from roughly 500,000 to nearly 57 million in 2016, according to data from the Fantasy Sports Trade Association.

Fantasy sports leagues are organized by informal groups of friends or strangers. Each league member selects their own players, creating an imaginary team that competes against other participants. In recent years, sites like DraftKings and FanDuel—known as Daily Fantasy Sports—allow players to compete with each other online. These sites charge fees for all users and doles out money to the respective winners. Both FanDuel and DraftKings hold roughly 90 percent of the DFS market in the United States. In late October, ESPN reported that both companies intended to merge by 2017.

In 2006, Congress exempted fantasy sports from an online gambling ban, saying skill was the primary factor for success. However, FanDuel and DraftKings came under fire last year for breaking state gambling laws and advertising misleading information. In November 2015, New York Attorney General Eric Schneiderman ordered FanDuel and DraftKings to cease all operations within the Empire State. Schneiderman cited a failure to obey gaming laws while promoting competition that relied heavily on chance rather than skill.

Under Schneiderman’s order, New York became the sixth state to ban both FanDuel and DraftKings (Arizona, Iowa, Louisiana, Montana and Washington have all banned DFS). The attorney general’s decision highlights the major challenges of DFS, as well as the friction between state and federal gambling laws. With 600,000 users, there is more DFS participation in the Empire State than anywhere else in the United States. Schneiderman said the companies had raked in nearly $200 million from customers, but only 12 percent of its customer base had made any money, which ran contrary to FanDuel and DraftKings’ marketing and advertising.

Both FanDuel and DraftKings had limited their operations in other states when legislative pressure heated up, but they decided to fight Schneiderman’s order in New York.

With the enlistment of lobbying efforts, their persistence ultimately paid off. The New York Assembly introduced a legislative measure that was eventually signed by Governor Andrew Cuomo in August, while the Attorney General litigated with FanDuel and Draft Kings. The approved regulation enforces taxes, controls advertisement, and implements safeguards to keep experienced players from competing with inexperienced amateurs. The state taxes are projected to add $4 million to New York’s education fund.

In October, the New York Attorney General reached a court settlement with FanDuel and DraftKings. The settlement forced both companies to pay $6 million for advertising false information. The agreement stipulates that each company must now “maintain a webpage that provides information about the rate of success of users in its contests, including the percentage of winnings captured by the top 1 percent, 5 percent or 10 percent.”

While the settlement did cost DraftKings and FanDuel $6 million, New York’s new regulations are a boon for DFS companies, who see the regulatory model as an example for other states to follow. In light of these regulatory pathways, rumors of a merger between DraftKings and FanDuel have surfaced. If a merger does occur, it would eliminate the statehouse battles each company has to fight separately. The Fantasy Sports Trade Association, in conjunction with DraftKings and FanDuel, has supported legislative efforts in 16 states that carve out legal protection for DFS operators.

However, DFS laws around the United States remain decidedly diverse:

  • Similar to Schneiderman’s order, Attorney Generals in Alabama, Delaware, Hawaii and Illinois have made statements labeling DFS illegal under state law.

Meanwhile, representatives in those states have introduced DFS-friendly legislation:

  • The Attorney General’s office in Texas and Georgia have both issued opinions stating DFS as “potentially illegal.” As a result, FanDuel left the Lone Star State while DraftKings remains, but both companies still operate in Georgia after the attorney general decided not to pursue legal action.
  • In New Jersey, legislators have classified DFS as a “game of chance,” but have not pursued legal action against any company.
  • While legislators approved DFS in Florida, federal prosecutors in the Sunshine State have convened grand juries to investigate certain sites for illegal gambling activity.

As of September, eleven states permitted DFS while thirteen have proposed legislation. However, there are 10 states that have approved DFS, but currently face scrutiny from lawmakers. “This regulatory patchwork could strengthen support for uniform DFS policies around the country” says Eric Martins, DMGS Managing Director,  “As fantasy sports enthusiasm continues to rise, state legislators and lawmakers throughout the country are likely to further modify gaming regulations.”

Sates with Approved DFS Legislation


House Bill 1404, which was approved in May, allows 18-year-olds to participate in DFS. However, Colorado law does not allow DFS for college sports. The bill also creates a Colorado Office of Fantasy Sports, which aims to set guidelines and prevent an illegal gambling outfit.


Governor Mike Pence signed SB 339 in March, which permits DFS for professional sports, but restricts participation in high school or college sports. The law also establishes the Paid Fantasy Sports Division of the Indiana Gaming Commission. The law require DFS operators to pay a $50,000 registration fee before they can operate within the state. Critics say the registration fee will give Draft Kings and FanDuel a monopoly within the Hoosier State.


In May 2015, Governor Sam Brownback signed HR 2155 into law. The regulation stipulates that DFS is a game of skill. Prior to the law, there was no mandate differentiating DFS and other forms of gambling.


In March, Attorney General Maura Healey announced a series of regulations for DFS. Players must be 21 years old and interactions between experienced and inexperienced players are strictly limited. The law also bans college sports and enforces a monthly cap of $1,000 on all players.


In May Governor Phil Bryant signed Senate Bill 2541, which legalizes DFS until July 2017. Bryant’s signature overrules an earlier state law that bans DFS. The measure also creates a task force that will deliver regulatory recommendations to the Governor.


Governor Jay Nixon signed House Bill 1941 in June. The bill exempts daily fantasy sports from state gambling regulations, while enforcement falls under the jurisdiction of state gaming officials. DFS operations must pay the Missouri Gaming Commission an application fee of $10,000 and an annual fee of 11.5 percent of the operator’s net revenue in Missouri from the previous year, or $11,500 annually.

Rhode Island

In February 2016, Rhode Island Attorney General Peter F. Kilmartin announced daily fantasy sports were legal under state law. Kilmartin recommended legislators create a regulatory framework, but the state assembly has yet to send one to the Governor’s desk.


In April, Governor Bill Haslam pushed through a bill that exempts DFS from anti-gambling laws. Haslam’s law legalizes cash-based fantasy contests and overrides a ruling made by the previous attorney general.

West Virginia

Attorney General Patrick Morrisey issued an opinion in April stating that DFS was permissible under state law because fantasy sports are a game of skill, not chance. The West Virginia Lottery Commission said it would oversee DFS, but would wait to recommend any regulations or laws.


In March Governor Terry McAuliffe signed the Fantasy Contests Act, which requires DFS operators to pay a $50,000 licensing fee and register with the Department of Agriculture and Consumer Services. Furthermore, DFS operators must undergo two independent audits every year, while banning DFS employees from participating in public contests.

States with Proposed DFS Legislation

Connecticut, California, Florida, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, New Mexico, Oklahoma, Pennsylvania, South Carolina and Wisconsin.

States with No DFS Legislation

Alaska, Arkansas, Maine, New Hampshire, North Carolina, North Dakota, Ohio, Oregon, Utah and Wyoming.

States with Contested Legislation

Alabama, Delaware, Georgia, Hawaii, Idaho, Illinois, Nevada, South Dakota, Texas and Vermont

States that Have Banned DFS

Arizona, Iowa, Louisiana, Montana and Washington





















PA House and Senate Leadership Results

Pennsylvania State Senate

The PA Senate Republicans and Democrats held their Leadership Elections on 11/16/16. There were no changes in Senate Leadership. The following is the complete list of the results:

 Title Majority Minority  

Interim President Pro Tempore




Joseph Scarnati


Jake Corman




Jay Costa




John Gordner


Anthony Williams


Caucus Chair


Bob Mensch


Wayne Fontana


Caucus Secretary

Richard Alloway Lawrence Farnese

Appropriations Committee Chair

Patrick Browne Vincent Hughes  

Caucus Administrator


Charles McIlhinney


John Yudichak


Policy Committee Chair


David Argall


Lisa Boscola


Pennsylvania State House

The PA House Republicans and Democrats held their Leadership Elections on 11/15/16.  The only changes were in Republican Leadership positions as Democratic Leadership stayed the same;  Appropriations Chair (formerly Bill Adolph who is retiring) is replaced by Stan Saylor (York); Caucus Administrator, currently held by Brian Ellis who lost to Kurt Masser (Northumberland); and Caucus Chair (formerly Sandra Major who is retiring) is replaced by Marci Toepel (Montgomery).  The following is the complete list of the results:

 Title Majority Minority



Mike Turzai


Dave Reed



Frank Dermody




Bryan Cutler


Michael K. Hanna


Caucus Chair


Marci Toepel


Dan Frankel

Caucus Secretary Donna Oberlander  

Rosita C. Youngblood

Appropriations Committee Chair Stan Saylor  

Joseph F. Markosek


Caucus Administrator


Kurt Masser


Neal P. Goodman


Policy Committee Chair


Kerry A. Benninghoff


P. Michael Sturla




DMGS’s Harrisburg PA Team Compiled this Report

Weekly Washington DC and Healthcare Policy Update

Election 2016

In what is being referred to as an historic upset, Donald Trump (R) defeated Hillary Clinton (D), winning 279 electoral votes. Clinton garnered only 228, falling far short of polls expectations. Totals in Arizona, Michigan, and New Hampshire remain too close to call. Arizona & Michigan will likely be won by Trump, with New Hampshire going to Clinton.

In the Senate & House, Republicans lost a handful of seats, but securely retained their majorities in both chambers. The Senate is currently 51 Republicans to 48 Democrats, with a run-off election for the Louisiana Senate race being held in early December.

House Republicans are likely to have a majority of at least 241, with Democrats flipping only a few districts in Illinois, New Jersey, New Hampshire, & Nevada.

In the hours after Donald Trump’s election as the 45th president of the U.S., Republicans in Congress claim a mandate for their agenda to revamp financial rules and replace Obamacare, and Hillary Clinton urged her supporters to give him a chance to govern.

Tax Revamp Optimism Reigns Among Ways and Means Republicans

House Ways and Means Committee Republicans are optimistic that 2017 might finally be the year to pass legislation overhauling the tax system—or, at least, the international side of the tax code. With majorities in the House and Senate, tax-focused leadership in both chambers and a tax proposal the committee pushed out last year, Republicans hope the time has come to eliminate some of the complexity in the tax laws in favor of lowering rates for corporations and individuals.

Short-Term Health Plans Cut to Under Three Months in New Rule

Short-term health plans bought by as many as a million people that do not comply with the Affordable Care Act must be limited to less than three months under a final rule issued Oct. 28 by three agencies. The short-term plans currently are limited to less than one year. They must end by Dec. 31, 2017, under the final rule (RIN:0938-AS93) from the Department of Health and Human Services, Department of Labor and the Internal Revenue Service. The plans are popular in states that have not expanded Medicaid under the ACA because they cover fewer benefits and cost less.

Court Rejects Challenge to Party ‘Soft Money’ Limits

A federal court rejected a challenge to the last major element of the McCain-Feingold campaign finance law, refusing to scrap restrictions on unlimited “soft money” contributions to political parties (Republican Party of La. v. Federal Election Commission, D.D.C., No. 15-cv-1241, 11/7/16). The Nov. 7 ruling by a special three-judge panel of the U.S. District Court for the District of Columbia sets up the case for a direct appeal to the Supreme Court.

The ruling, which was written by U.S. Circuit Judge Sri Srinivasan, said courts have upheld soft money restrictions of McCain-Feingold—also known as the Bipartisan Campaign Reform Act, or BCRA—in a series of cases going back to the 2003 Supreme Court ruling in McConnell v. FEC. The campaign finance law was passed in 2002 and is named for its primary sponsors, Sen. John McCain (R-Ariz.) and former Sen. Russ Feingold (D-Wis.). “We are not the first court to consider First Amendment challenges to BCRA’s limits on state and local political parties’ use of soft-money donations,” Srinivasan wrote in a 20-page opinion. “We see no salient distinction between the First Amendment claims rejected in those cases and the challenge presented here.”

Srinivasan’s decision was joined by the other members of the court panel: U.S. District Judges Christopher Cooper and Tanya Chutkan. The ruling upheld BCRA provisions that set a $10,000 “hard money” annual limit per contributor on the amount a state party committee can raise for activities that could influence a federal election.

More Time, Links to States Sought Under EPA Energy Incentives

A federal plan to spur new renewable energy and energy efficiency programs in support of carbon dioxide reductions from the power sector will require more time and methods to link with existing state programs, state officials said. Even supporters of the Environmental Protection Agency’s Clean Energy Efficiency Program, which rewards states for energy efficiency efforts and renewable energy investments in disadvantaged communities in 2020 and 2021, questioned how effective the program would be in comments on the proposed rule.

“If allowances were based on energy savings/generation accruing over a longer time frame (for example, from project commissioning through 2030 rather than just in 2020 and 2021), which would be demonstrated through standard protocols for modeling savings/generation, individual projects would see more compelling value in [Clean Energy Incentive Program] participation,” officials from the Massachusetts Departments of Environmental Protection, Energy Resources and Housing and Community Development said in comments on the EPA’s proposal. The Clean Energy Incentive Program (RIN:2060-AS84) would provide states with additional credits for every megawatt-hour of electricity demand reduced through energy efficiency in low-income communities beginning Sept. 6, 2018, and for each megawatt-hour of zero emissions generation for projects that begin commercial operation after Jan. 1, 2020. The credits can be used toward compliance with the Clean Power Plan, which limits carbon dioxide emissions from the existing fleet of fossil fuel-fired power plants. The comment period on the proposed incentive program closed Nov. 1.

The additional emission rate credits would be generated for 2020 and 2021, before the Clean Power Plan, which has been stayed by the U.S. Supreme Court, is intended to take effect. State regulators argued that is not sufficient time for significant investments in renewable energy or energy efficiency programs for low-income communities, which could hamper the incentive program’s effectiveness. Several states called on the EPA to extend the period during which programs could qualify for the additional credits, including giving states credit for programs that are already in place to accomplish those goals. “States, especially smaller ones, like West Virginia, simply cannot divert resources to developing and implementing an entirely new bureaucracy for a program that has only a two-year life and will provide relatively minor environmental benefit,” the West Virginia Department of Environmental Protection said in its comments. West Virginia has led legal challenges against the EPA’s Clean Power Plan.

USDA to Tighten Food Safety Inspections in 5-Year Plan

The Agriculture Department office tasked with inspecting meat, poultry and eggs for foodborne pathogens is set to expand its testing as part of its five-year strategic plan. In its report, the Food Safety and Inspection Service laid out a broad agenda that would increase inspections, toughen food safety standards, and expand processes for evaluating imported food products covered by the agency.

“FSIS is expanding the breadth, depth, and frequency of its sampling to better address gaps in testing for pathogens and chemical residues in FSIS-regulated products,” the agency said in the Nov. 4 report. The agency plans to toughen pathogen reduction standards, increase the percentage of establishments at which FSIS collects samples and streamline its testing process to reduce duplication, the report said.

The agency said it will put a priority on large-scale facilities like retail and warehouse locations. “With several hundred to thousands of in-commerce facilities that handle FSIS-regulated products in every State, FSIS, with State and local regulatory agencies, must strategically utilize regulatory resources to maximize coverage and efficiencies to ensure that food remains safe as it moves through the supply chain from production to actual consumption,” FSIS said.

FSIS said it would also update its method for estimating illnesses attributed to products the agency inspects, making the data less sensitive to year-to-year fluctuations. “These updates will provide greater transparency and understanding regarding the pathogens causing the majority of estimated illnesses, facilitating a more detailed assessment of agency progress,” FSIS said.

SCOTUS May Choose Senate in Advice and Consent Fight

A fight over the president’s power to fill temporary vacancies without the advice and consent of the Senate played out at the U.S. Supreme Court Nov. 7 (NLRB v. SW General, Inc., U.S., No. 15-1251, argued 11/7/16). The parties agree that Congress passed the 1998 Federal Vacancies Reform Act to regain the power it had lost when presidents from both parties flouted the previous law’s requirements, including by appointing their desired nominee to a lower position and then allowing them to serve as the “acting” official. However, the parties disagree on whether a person serving in an acting capacity may continue to serve after being nominated to fill the role permanently.

The justices seemed to lean in favor of requiring nearly all acting officials to step aside while their permanent nomination is being considered—not just a limited few. All eight of the lower court judges who have looked at the issue have decided it that way, Justice Anthony M. Kennedy said. Conspicuously missing from Monday’s argument was the Senate itself. SW General Inc., the losing party in a National Labor Relations Board proceeding over unfair labor practices, brought the challenge to the president’s authority.

Medicare Appeal Backlog Could Be Cleared by 2019, HHS Claims

The multiyear backlog of Medicare administrative appeals could be cleared up by the end of fiscal year 2019, according to an HHS filing in federal district court (Am. Hosp. Ass’n v. Burwell, D.D.C., No. 1:14-cv-851, opposition brief filed 11/7/16). The Health and Human Services Department asked the U.S. District Court for the District of Columbia Nov. 7 not to intervene in the appeals process, seeking dismissal of a case brought by the American Hospital Association (AHA) and three regional hospitals. The hospitals want a court order requiring the HHS to implement procedures designed to curtail the extensive appeals backlog they say is caused by the recovery audit contractor program. The AHA is expected to reply to the HHS filing in the case by Nov. 15.

The AHA has claimed the agency’s Office of Medicare Hearings and Appeals (OMHA) must, by law, resolve appeals within 90 days. However, as of February 2015, appeal resolution stretched to an average of 572 days and caused the HHS to suspend all new appeals for two years. According to the Nov. 7 filing, the HHS has worked to reduce pending appeals by 26 percent and to stem the tide of incoming appeals in an effort to cut down on the delay. The appeals backlog has grown as providers are challenging decisions by the HHS and its contractors to deny reimbursement for treatment of Medicare and Medicaid patients.

According to the HHS, the OMHA faces 658,307 pending appeals as of Sept. 30, 2016—down from 886,418 from a year earlier—and expects to reduce that number even further in the coming year. To support its projection that the backlog could be reduced to zero by 2019, the HHS points to administrative settlement programs and increased funding from the proposed Audit & Appeals Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015, a bill pending in Congress.

Cures Bill Likely Delayed by Democrats’ Drug-Pricing Demands

Democrats plan to oppose any effort to pass a new version of the 21st Century Cures Act unless it includes some policies targeting drug pricing. Leaders on the House Energy and Commerce Committee are seeking a new deal to enact the Cures bill during the lame-duck session, set to start Nov. 14. The bill, which is an effort to speed new drugs and devices to market, has support from House leadership, but any opposition from Democrats on the Senate Health, Education, Labor and Pensions Committee could prevent it from reaching the president’s desk.

Progressive think tanks and unions have stepped up their lobbying efforts in recent weeks to encourage Democrats to seek drug-pricing concessions from Republicans. Further clouding the Cures Act’s future is rising disagreement over possible changes to a Food and Drug Administration program that affects how generic drugs enter the market. The House version would extend the exclusivity period by six months on an FDA-approved drug or biological product that treats a rare disease or condition.

Conservatives have supported some drug-pricing measures, but it is unclear what agreement the two sides could reach by the start of the next session. Democrats want any final Cures bill to include some policies that facilitate access to affordable drugs and funding for the cancer “moonshot,” an effort to double the rate of progress in cancer research led by Vice President Joe Biden.

The House passed the bill in summer 2015, but the legislation has been held up in the Senate over disagreements on its multibillion-dollar price tag. Further complicating the matter, more than a dozen groups—including the Center for American Progress, the AFL-CIO and Public Citizen—sent a letter Oct. 26 to Democratic leaders in the House and Senate asking them to delay passing Cures until 2017.

Obamacare Cases in Limbo Following Republican Wins

The legal landscape for Obamacare-related litigation is uncertain following Republicans’ election-day sweep

The cases range from challenges to rules implementing the Affordable Care Act’s essential coverage provisions to insurers’ demands for payments allegedly due them under the ACA’s premium stabilization programs, known as the three Rs.

The stakes are high. Health care is a $3 trillion, heavily regulated industry. Government policies—and court decisions—affecting how providers get paid and how Americans access care are crucial to its future. President-elect Donald J. Trump said he would ask Congress to repeal Obamacare. The proposal would prompt a filibuster in the Senate, where Democrats retained enough votes to block it. Congress, however, will do its best to scale back the Affordable Care Act in budget reconciliation proceedings. Republicans are expected to keep some popular provisions, like those prohibiting insurers from denying coverage based on pre-existing conditions and requiring continued coverage for young adults up to age 26. While essential coverage provisions may survive, but the Trump administration could gut rules implementing them, like the contraceptive mandate, and the individual mandate, premium tax credits and Medicaid expansion “are all on the table”.

House Republicans Shunned in Obamacare Risk Corridor Suit

House Republicans Nov. 7 lost a bid to introduce a new defense into a health insurer’s suit seeking billions in unpaid Obamacare risk corridor funds (Health Republic Ins. Co. v. United States, 2016 BL 371062, Fed. Cl., No. 16-cv-259C, 11/7/16). The Department of Justice’s exclusive control over litigation involving the U.S. prevented the House from entering Health Republic Insurance Co.’s suit on the government’s behalf, the U.S. Court of Federal Claims said.

The court denied the House’s Oct. 13 request to file a friend-of-the-court brief in which it argued insurers couldn’t recover the money because the Affordable Care Act’s risk corridor program was meant to be budget-neutral (200 DER, 10/17/16). There are 11 cases pending in which insurers are trying to recover up to $5 billion in risk corridor money. The DOJ raised the same argument as the House in later-filed suits, but not in Health Republic’s purported class action.

CMS Seeking Input on How to Expand Medicaid Home Care Program

The CMS wants input on expanding a Medicaid program to help beneficiaries stay in their homes instead of institutional settings. The Centers for Medicare & Medicaid Services Nov. 4 said it wants input on the reforms needed to expand Medicaid’s home and community-based services. The agency requested comments in a notice (RIN:0938-ZB33) set for Nov. 9 Federal Register publication.

The home and community-based services programs provides individuals requiring personal care, respite care and other services the opportunity to receive those services in their own homes or in the community, instead of nursing homes or other institutional settings. Growth of the program means Medicaid now spends more on home and community-based services than it does on institutional care. In fiscal 2014, 53 percent of the $152 billion spent nationally on Medicaid’s long-term support services was for home and community-based services. The rate spent on home and community-based services (HCBS) in the late 1990s stood at roughly 25 percent, the notice said.

More than 3.2 million Medicaid beneficiaries received home and community-based services in calendar year 2012. This is a growth of almost 1 million individuals since 2002. Comments (using code CMS-2404-NC) are due Jan. 9.

John Zang Contributed to this report

Recreational Marijuana Ballot Initiatives

By Danny Restivo

Support for legalized Marijuana in the United States is growing nearly as fast as its profits. With recreational marijuana legal in Colorado, Washington, Oregon, and now Alaska, sales have projected to hit $4.3 billion in 2016, according to the Marijuana Business Daily’s 2016 factbook. Some experts have even predicted a $22 billion industry by 2020. These figures have attracted state’s and investors hoping to cash in on a lucrative revenue source. In November, voters in four states—Arizona, Massachusetts, California Nevada, and Maine—will decide whether to permit recreational marijuana (REC). All of these states currently allow Medical Marijuana (MMJ), which they hope to integrate into their regulatory framework. If voters approve their respective initiatives, it could further legitimize cannabis’ economic value.

In light of these ballot proposals, the Drug Enforcement Agency announced in August that marijuana would remain a schedule 1 narcotic under the Controlled Substance Act. Written in 1970, the Controlled Substance Act categorizes marijuana—as well as heroin, ecstasy, and other narcotics—as a “drug with no currently accepted medical use and a high potential for abuse.” In their announcement, the agency cited a need to further study and research the benefits of Marijuana. The DEA’s decision comes after the Department of Health and Human Services recommended moving the drug from a schedule 1 classification to a schedule 3 classification, which would acknowledge its health benefits and make it easier to prescribe. Currently, doctors can only “recommend” cannabis to patients in a state with medical marijuana.

To help stymie the potential for prosecution, President Obama issued a memo in 2009 to federal prosecutors encouraging them not to prosecute medical marijuana operations that are in accordance with state law. In 2013, after Colorado and Washington had passed laws legalizing marijuana, the Department of Justice announced an update to their marijuana enforcement policy. The announcement stipulated that marijuana would remain illegal under federal law, but they expected states like Colorado and Washington to create “strong state-based enforcement efforts…” Ultimately, the DOJ reserved the right to challenge their policy, but they maintained “they wouldn’t do it at this time.”

As a result, the four states with marijuana ballot proposals in 2016 have mirrored their legislation off the legal cannabis markets in Colorado, Oregon, Washington and Alaska. All stipulate that 21-year-olds can legally purchase and possess up to an ounce of pot. However, cultivation policies, tax rates, state revenue and the distribution of those funds all differ. Here’s a glimpse at the current marijuana regulatory framework in place.

States with Recreational Marijuana


Alaska became the third state to legalize marijuana after voters approved Measure Two in 2014. Since then Alaska has established a Marijuana Control board, which has adopted regulations for packaging, distribution, store locations and edibles. The agency has enacted a $50 per ounce tax on marijuana cultivators, as well as 25 percent excise tax on retail cannabis.  The state’s Department of Revenue expects to collect $12 million annually. Roughly half of that money will go towards Alaska’s Department of Correction’s Substance Abuse Treatment Program, the Department of Health and Social Services and the Department of Public Safety. In July, Governor Bill Walker signed a bill that would allocate half of the excise tax to programs aiming to reduce prison recidivism. Regulators are expected to strictly monitor taxes and fees when retail stores come online in late 2016.


Since approving recreational marijuana in 2012, Colorado has served as a bellwether model for other states looking to adopt recreational or MMJ programs. Colorado has issued 1,303 medical licenses for stores, grow sites, product manufacturers and testing facilities. On October 1, 2016, the state issued new guidelines to limit the THC concentrate in edibles and marijuana fluids and waxes.

Colorado’s cannabis market is monitored by the Marijuana Enforcement Division of the Department of Revenue. The state’s policy allows adults to grow up to six plants at home, three of which may be flowering. Colorado charges a 15-percent tax on wholesale marijuana prices, plus a 10-percent tax on sales, which will drop to 8 percent in 2017. Furthermore, local municipalities can add additional charges or taxes. In Denver, a customer pays roughly 21 percent in taxes on a retail cannabis purchase. In 2014, the state collected $59 million in taxes, fees and licenses, while the revenue increased to $135 million in 2015. That revenue is roughly once percent of the state’s entire budget. Thirty-five million dollars of the 2015 revenue went to the public education system, while the remaining revenue was redistributed into the marijuana enforcement division.


Unlike Colorado and Alaska, Washington does not allow personal cultivation, which is considered a felony under the new law. The state also has limits the amount of marijuana-infused edibles or liquids someone can purchase or possess. Washington imposes a 37-percent excise tax on all retail marijuana sales, a gross receipt tax from the state Business & Occupation (B&O), a 6.5 percent sales tax, plus local sales taxes. In its first full year of legal use (July 1, 2015 to June 30, 2016) the state collected $62 million in excise taxes, $10 million in state sales taxes, $1.3 million in state B&O taxes, and $3.6 million in local sales taxes on $157 million in retail sales, according to Washington State’s Liquor and Cannabis Board. Forty percent of that money will go to the state’s general fund and local budgets, while the remaining 60 percent is earmarked for substance abuse prevention, research, education, and health care. In January 2016, the WSLCB announced that it would increase the number of marijuana retail stores from 334 to 556. With an increase in retail operations, the state has projected $136 million in collecting taxes.


In Oregon, it’s legal to possess one ounce of marijuana in public, while it’s ok to keep up to four plants at home.  After legalizing recreational pot in 2014, the state’s liquor control commission began overseeing Oregon’s marijuana retail stores. The commission established a 17-percent tax on the retail price of recreational marijuana, which will go into effect in late 2016. Until then, the state has collected a 25-percent excise tax. In August, the Department of Revenue reported $25.5 million in sales tax revenue from the state’s 309 dispensaries. As part of the state’s regulatory policy, local governments can adopt ordinances that add up to 3 percent in sales tax.

The state expects it will collect roughly $44.4 million in marijuana taxes throughout 2016. Roughly $12 million is earmarked for the state’s regulatory efforts. Forty percent of the remaining funds will go to education, 20 percent to mental health and substance abuse, 15 percent to the Oregon state police, 10 percent to local law enforcement and 5 percent to Oregon Health Authority.

Washington, D.C.

In 2014, voters approved an initiative to legalize Marijuana. However, a month later congressional Republicans inserted a clause into the city’s budget that prevents any federal funds from regulating legalized cannabis. When local legislators attempted to create a regulatory framework, they were threatened with fines. As a result, there is no legal sale or distribution of pot in D.C. however Marijuana consumers can have up to two ounces and  grow up to six plants, but smoking in public is strictly prohibited.

States with Recreational Marijuana Initiatives on the Ballot in 2016


Proposition 64 would allow consumers to carry up to an ounce of pot, while also allowing a person to grow six plants at home and purchase eight grams of concentrate. If proposition 64 is approved, market experts believe California—which is home to 23 percent of America’s population—will send a strong message to other state’s debating recreational cannabis. Furthermore, recreational marijuana would be completely legal on the West Coast. The initiative’s support campaign has raised roughly $17 million, most of which originated from Silicon Valley investors. By comparison, the opposition has raised roughly $250,000.

According to a Public Policy Institute of California poll taken in May, 60 percent of Californians support the legalization of Marijuana. The proposal would create a new Bureau of Marijuana Control, which will work with the Department of Consumer Affairs, the Department of Public Health and the Department of Food and Agriculture to help monitor the industry.

The measure will also establish a 15-percent sales tax as well as a cultivation tax of $9.25 per ounce for flowers and $2.75 per ounce for leaves, with exceptions for qualifying medical marijuana sales and cultivation. According to some projections, the state could collect up to a $1 billion a year in tax revenue. The proposal has loosely outlined how states and localities may implement the measure, as well as how the tax revenue will get distributed to state and local agencies.


Proposition 205 would allow a 21-year-old to possess up to an ounce of marijuana, and grow up to six plants in their home. Recent polls have showed voters are evenly split on the issue. Republican Senator John McCain has voiced support for Prop 205, while Republican Governor Doug Ducey opposes the initiative. If approved, the state would create a Marijuana Commission that would further establish transportation, manufacturing and retail guidelines for pot. Marijuana would receive a 15-percent sales tax, while 80 percent of the generated revenue would be directed to education with the remaining 20 percent going to the Department of Health services. Projections on tax revenue have been as high $130 million to as low as $55 million.


If approved in November, Question One will have the least strict marijuana guidelines in the United Sates. The state would allow 21-year-olds to purchase and possess up to 2.5 ounces of marijuana, more than twice the legal amount in Oregon and California. The law would also allow adults to grow up to 12 plants, as long as no more than six have flowered. Furthermore, Maine’s proposed 10 percent sales tax is far less than other regulated states. Projected estimates believe the state could generate an additional $9 million, 98 percent of which would go to the general fund while two percent would go to Maine’s Local Government Fund.

Governor Paul LePage and Attorney General Janet Mills have both expressed opposition to the proposal. However, a recent poll from the Bangor Daily News shows 55 percent support for the law, while 40 percent oppose it.


Like other states, Massachusetts’ Question Four would allow adults 21-years and older to purchase an ounce of cannabis, or five grams of concentrate. Residents would be allowed to grow six plants at home, with a maximum of 12 per household. Question Four would establish a cannabis control commission to help regulate cultivation, testing, manufacturing and retail. Experts believe a marijuana market within the state has the potential to generate $100 million in sales. The state has proposed a 12-percent tax; 6.25 percent would be a sales tax and 3.75 percent would be an excise tax used to fund the commission’s operating budget. The remaining two percent would go to the locality where the marijuana was purchased.

Republican Governor Charlie Baker, Boston Democratic Mayor Marty Walsh and Attorney General Maura Healey all oppose the measure. However, a poll by Ballotpedia shows a majority of support among likely voters.


Like other Western states, Nevada’s Question 2 would allow 21-year olds to purchase and possess up to an ounce of marijuana, while allowing 1/8 of an ounce of liquid concentrate. Efforts to legalize marijuana failed within the statehouse in 2013 and 2015. However, proponents believe they have a better shot for approval via statewide vote. The measure calls for a 15-percent excise tax on wholesale marijuana sales in addition to other sales and use taxes. The proposal is also calling for variety of licensing fees, which could span from $3,000 to $30,000 depending on the operation. While the state hasn’t projected any numbers for tax revenue, a report commissioned by proponents suggests the industry will bring in more than $464 million in tax revenue between 2018 and 2024. If the measure is approved, that money will go to the Department of Taxation and local municipalities for administration and regulation costs, and leftovers would go to the state’s general education fund.

According to Ballotpedia, only one poll on the issue exists, but it supports Question 2 with support at 50 percent, while opposition hovers at 41 percent. Democratic Senate candidate Catherine Cortez Masto and Sen. Harry Reid have both voiced opposition to the legislation, as well as the Nevada Resort Association—the chief lobbying arm of the Las Vegas casino industry. More importantly, Republic Governor Brian Sandoval has also voiced opposition, which may create more hurdles if the proposition is approved by voters


















Will California’s Proposition 64 turn the tide in the weed war?






DMGS Health Care Policy Update

Medicare Trying to Avoid Confusion From Multiple Payment Models

The Medicare agency is working to end the confusion that can result when providers participate in more than one payment test model from its innovation center, a top CMS official said. “These models can and should work together,” Patrick Conway, the CMS’s deputy administrator for innovation and quality, said. The Centers for Medicare & Medicaid Services is trying to align model results so that a doctor participating in both an accountable care organization and a bundled payment model, for example, will know how to attribute savings from each, he said.

The CMS realizes there have been growing overlap problems as more models are introduced, Patrick Conway, who is also the CMS’s acting principal deputy administrator and chief medical officer, told a gathering of health plan officials Oct. 25 at America’s Health Insurance Plans’ Medicare conference. The agency’s Center for Medicare and Medicaid Innovation is testing ways to align the payment models so that a clinician who is part of multiple models knows where to attribute patients and the savings that spring from each, he said. The number of models has proliferated as the CMS works to get doctors out of fee-for-service Medicare and into alternative reimbursement methods that emphasize quality of care and payment risk.

HHS: Nearly 25 Percent of Health Payments Now Based on Care Coordination, Quality

The health care industry is making progress toward paying providers based on new quality-based alternative payment models, according to a report released Oct. 25. Nearly 25 percent of Medicare Advantage, Medicaid and commercial payments are now being made through alternative models, according to the report released at a conference held by the Health Care Payment Learning & Action Network, a public-private partnership sponsored by the Centers for Medicare & Medicaid Services. The Obama administration’s goal for alternative payment models in Medicare is 30 percent in 2016 and 50 percent by the end of 2018.

Moving away from fee-for-service, which health-care experts say rewards volume instead of value of health services, has been a chief goal for the HHS and for health plans in the quest to reduce runaway U.S. health-care costs. The federal government and health insurers are trying to move providers to alternative payment models that are intended to reward better coordinated, more cost-effective care. Health and Human Services Secretary Sylvia Mathews Burwell spoke at the summit, announcing the CMS will re-open two alternative payment models for Medicare providers in 2018, the Next Generation ACO and Comprehensive Primary Care Plus. This will allow medical practices to earn more for taking some risk for patient outcomes. In addition, the CMS’s Oncology Care Model will qualify as an advanced alternative payment model in 2017, the CMS said.

Expanding alternative payment models “means that by 2018, clinicians will have a total of 10 models from the innovation center to choose from as they transition to the quality payment program,” Burwell said, referring to the Center for Medicare and Medicaid Innovation. Starting in 2019, clinicians participating in the quality payment program will also be rewarded for participating in advanced alternative payment models in Medicaid and with commercial payers, she said. Insurers and states representing nearly 200 million patients voluntarily reported their progress moving to alternative payment models, Burwell said. Twenty-three percent of all their health-care spending in 2015 was through alternative payment models, she said.

House Obamacare Dispute Wrongly Decided, HHS Says

A political dispute between two branches of government didn’t belong in a federal court and should have been dismissed before trial, an Oct. 24 administration brief told an appeals court (U.S. House of Representatives v. Burwell, D.C. Cir., No. 16-5202, brief filed 10/24/16). The Obama administration is trying to overturn a decision holding that the Health and Human Services Department and the Treasury Department unlawfully paid insurers cost-sharing subsidies under the Affordable Care Act (25 HLR 717, 5/19/16).

The subsidies were intended to compensate insurers for reducing amounts low-income insured individuals normally would pay, like copays and coinsurance, so the plans would be more affordable. If upheld, the lower court’s decision would prevent insurers’ receipt of billions in federal money. Such a ruling, in the House of Representatives’ favor, could lead to more insurer failures and premium increases. Litigation, however, is a lengthy process, and political realities could ultimately turn the case around.

CMS Halts Automatic Enrollments for New Medicare Advantage Members

Medicare has temporarily stopped granting new approvals to managed care plans that want to automatically enroll their commercial and Medicaid plan members into Medicare Advantage when they become Medicare eligible, the CMS said in an Oct. 21 memo. The Centers for Medicare & Medicaid Services already allows 29 companies to automatically shift these members into Medicare Advantage plans. The companies include UnitedHealth Group, Health First, Anthem and Blue Cross Blue Shield of Michigan. The temporary suspension comes after recent inquiries about protections for enrollees who have been shifted, Michael Crochunis, acting director of the CMS’s Medicare Enrollment & Appeals Group, said in the memo.

Open enrollment for MA and Part D plans in 2017 began Oct. 17 and will end on Dec. 7. The agency said it is reviewing its policies and will issue additional instructions for insurers already allowed to engage in “seamless enrollment” to clarify its stance on beneficiary protections and other requirements. As part of the review, the agency will try to ensure that “enrollment into the MA plan is line with the beneficiary’s wishes and is not the result of a lack of understanding on the part of the beneficiary of the need to deliberately decline the MA enrollment if it is not desired,” a CMS spokesman said.


John Zang Contributed to this Report

Legislative Overview: Electronic Cigarettes

By Danny Restivo, DMGS

In May the Food and Drug Administration expanded tobacco regulations to include electronic cigarettes. Many have hailed the product as a smoking cessation tool, while others see it as a gateway into nicotine addiction or potentially worse. As officials debate the benefits and hazards of e-cigarettes—which uses battery power to deliver liquid nicotine in the form of vapor—a sizable market has emerged. According to a 2014 study by the Centers for Disease Control, 12.6 percent of adults say they have used an e-cigarette, with use highest among 18-24 year-olds. Meanwhile, additional data released by the CDC in 2015 shows e-cigarette use tripling among middle school students, from 120,000 to 450,000 during 2013-2014. A large number of state and local laws prohibit the selling of e-cigarettes to anyone under 18, but the FDA’s regulations apply to every state.

The FDA’s regulation also places the $3.7 billion e-cigarette, or vaping, industry into the same regulatory category as tobacco, a competing market valued at roughly $95 billion. As a result, e-cigarette owners are stuck in a two front tug-of-war between the FDA and the tobacco industry. E-cigarette producers are now asking why they should face the same regulatory scrutiny when evidence suggests their product may be less hazardous compared to cigarette smoke. A 2014 study commissioned by the United Kingdom’s health agency shows electronic cigarettes are 95 percent less harmful than traditional cigarettes. While the e-cigarette industry tries to separate itself from the tobacco industry in the eyes of U.S. regulators, the FDA’s mandate can now buttress arguments for taxing e-cigarettes like tobacco products.

In November, California voters will go to the ballot and decide on proposition 56. If approved, the law would increase a cigarette tax from 87 cents to $2, which will extend to e-cigarettes. If voters enact this measure, California would join five other states with taxes on e-cigarettes, including Kansas, Louisiana, Minnesota, Pennsylvania and North Carolina.

In October, the Pennsylvania legislature approved a tax on all tobacco and e-cigarette items. Vendors now face a tax rate equal to 40 percent of the wholesale price on all e-cigarette items, making $15 e-cigarette products $20. Conversely, traditional tobacco cigarettes may increase by $1.60 per pack. Keystone state store owners who sell e-cigarette products are now trying to substitute the wholesale tax with a 5-cent-per-milliliter retail tax on vapor liquid. The 5-cent tax is similar to legislation North Carolina Governor Pat McCrory signed into law in May 2014. However, since the state legislation originated before the recent FDA regulations, traditional cigarettes received a more burdensome excise compared to vaping products.

In an effort to fill a $400 million budget deficit, Kansas legislators approved a package of tax increases, which included an excise on all tobacco and e-cigarette products. The law placed an additional 50-cent charge on cigarette packs, as well as 20-cent per milliliter on all vaping liquids. Meanwhile, both Louisiana and Minnesota have laws that regulate e-cigarettes the same as tobacco products.

While they haven’t implemented a tax, Indiana approved questionable regulatory policies that led the FBI to question state leaders in August. The Hoosier state’s e-cigarette law, which was signed by Governor Mike Pence in April, stipulates manufacturing guidelines for e-cigarette producers. Among the regulations was a guideline requiring a company that produced e-cigarette items to have a certification by a security company by June 30, 2016. However, based on the state guidelines for those security companies, there was only one available company that met the laws standards. Since then, only six e-cigarette companies, among a large number of available producers, have been approved to sell their products in Indiana. In essence, the new regulatory policy has created an oligopoly on e-cigarettes in the Hoosier state. The FBI has not confirmed the investigation, but several lawmakers have admitted they were questioned by agents.

While five states have passed tax policies regarding e-cigarettes, seven others—including California, Connecticut, Delaware, Hawaii, Maine, New Jersey and North Dakota—have all placed restrictions on the use of e-cigarettes in public. Most of these state regulations prohibit e-cigarettes in workplaces, bars, restaurants and other public places, treating it the same as smoking tobacco in public places.

In some states, local laws have come into conflict with the state’s categorization of vaping. In February, following a case in which an e-cigarette user was on a subway platform, a New York court ruled that e-cigarette users can’t be charged with violating the state’s anti-smoking laws because it’s not the same as smoking. The ruling read that smoking is “the burning of a lighted cigar, cigarette, pipe or any other matter of substance which contains tobacco,” whereas “An electronic cigarette neither burns nor contains tobacco. Instead, the use of such a device, which is commonly referred to as ‘vaping,’ involves ‘the inhalation of vaporized e-cigarette liquid consisting of water, nicotine, a base of propyleneglycol or vegetable glycerin and occasionally, flavoring.’ This does not fit within the definition of ‘smoking’ under the law.” While the city’s anti-smoking ordinance does extend to vaping, the police officers who arrested the e-cigarette user charged him under the state code as opposed to the city code. Since the incident, the New York State assembly is attempting to amend the law to include e-cigarettes.

In Kentucky, smoking in certain establishments is permitted, but Louisville approved anti-smoking ordinances in workplaces and public spaces in 2008. However, the law did not specify e-cigarettes. During recent public forums on whether to extend the ordinances to include e-cigarettes, supporters of the ban cited research from public health organizations as evidence of the harmful effects of vaping in public. Critics of the extension point to other research that shows vaping’s ability to help smokers kick the habit, therefore improving public health.

As the FDA takes a larger role in regulatory oversight of e-cigarettes, state’s may perceive vaping the same as traditional cigarette smoking. Early research from various public health organizations has provided a mixed bag of evidence regarding the harmful impacts of e-cigarettes. However, as the popularity of vaping grows, cities and states will have to decide whether to treat vaping as a public health hazard, or a beneficial tool.

For more information on e-cigarettes and smoking laws for each state, check out the interactive map from the Public Health Law Center.















Washington and Health Care Update

Election 2016

There are now less than two weeks until the November 8th election. The final presidential debate was held last Wednesday evening at the University of Nevada in Las Vegas, NV. Both Donald Trump & Hillary Clinton discussed their plans to address immigration, tax policy, the national debt, and foreign conflicts. According to FiveThirtyEight modeling based on current polling, support for Clinton is holding steady at a 6-point lead in national polls. Clinton is projected to receive 341 electoral votes, with Trump receiving 197.

WTO Sides With Chinese in Dispute Over U.S. Targeted Dumping Methods

The World Trade Organization generally sided with China in a dispute regarding U.S. antidumping duties imposed on 13 imported Chinese products. The WTO said the U.S. violated its international trade obligations in using a “targeted dumping methodology,” including zeroing, in original investigations and administrative reviews, according to the text of an Oct. 19 ruling.

“Targeted dumping” involves patterns of export prices that differ significantly among purchasers, regions or periods of time and which could be used to conceal dumping that cannot be appropriately taken into account under the standard “average-to-average” methodology for price comparison. Beijing filed the case in 2013 alleging that the U.S. Commerce Department’s antidumping methodologies were inconsistent with the WTO’s Antidumping Agreement.

The decision is noteworthy in that it marks the second time the WTO has rejected Washington’s use of a so-called “weighted average-to-transaction” and “zeroing” methodologies in its dumping investigations. The U.S. must now determine whether or how it will comply with the WTO decision or face the prospect of billions of dollars’ worth of retaliatory trade tariffs.

Health Care News

Obamacare Sign-Ups to Increase by 1 Million in 2017

Amid intense efforts by the Obama administration to target the uninsured in the U.S. president’s final months in the White House, sign-ups for health plans created under his signature domestic law are expected to rise by about 1 million next year.

The forecast illustrates the administration’s confidence in enrolling more people and keeping those who are covered from dropping out in a challenging year. However, the Obamacare exchanges are still not attracting enough young, healthy, and higher-income individuals who could help spread the health-care costs of the sickest over a bigger group.

About 13.8 million people will pick Affordable Care Act plans during the enrollment period that starts Nov. 1, the government estimated Wednesday, up from 12.7 million a year earlier.

“This is the last open enrollment for this administration,” Health & Human Services Secretary Sylvia Mathews Burwell said in a speech in Washington. “We’re going to make it count.”

2017 could be a particularly tough year to persuade people to sign up, with premiums rising and options narrowing in some markets. Surveys have shown that high costs are a key reason people are not buying plans, even when subsidies help lower premiums to under $100 a month for many individuals.

Passed in 2010, the ACA, among President Barack Obama’s key domestic policy achievements, helped push the number of people without insurance to record lows in the U.S. Still, millions of uninsured have not signed up and the law remains politically divisive. In the presidential race, Democratic candidate Hillary Clinton has called for bolstering subsidies to help more people buy coverage. Donald Trump, her Republican opponent, has said he would repeal Obamacare while working to ensure that people were still able to find health insurance.

The government estimates that a third of the 10.7 million eligible uninsured will pick ACA plans for next year, underscoring the difficulty of reaching those who have been left behind by the law’s gains. Some people are not buying ACA plans because of their cost, according to a Commonwealth Fund study. A separate report from the Kaiser Family Foundation found that about 5.3 million of the 27.2 million who are uninsured might be eligible for financial subsidies to help them buy ACA coverage.

Pa. Hospitals Drop Merger Effort After Court Loss

Two hospitals in Pennsylvania have decided to abandon a planned merger, after a federal appeals court last month granted a preliminary injunction to prevent the merger pending FTC review of the case. The Federal Trade Commission, in an Oct. 17 press statement, said the now-defunct proposed merger between PinnacleHealth System and Penn State Hershey Medical Center would have hurt consumers.

The merger would have joined a group of community hospitals owned by Pinnacle in and around Harrisburg, Pa., with the leading academic medical center and the primary teaching hospital of the Penn State College of Medicine, 14 miles away in Hershey, Pa. The FTC argued throughout the litigation that the merger would have hurt the market for hospital services in Harrisburg. The decision by the hospitals to abandon their merger plans could be considered a major win for the FTC, which only a couple of months ago seemed to be in danger of being forced to reconsider how it evaluated hospital mergers. Before the Third Circuit ruled, the commission had twice suffered defeats in federal trial courts when judges questioned its method of evaluating the geographic market for determining whether a proposed merger would create an anticompetitive hospital services market.

Cancer ‘Moonshot’ to Harness Microsoft’s Computing Power

The White House’s “moonshot” initiative to transform cancer care taps into industry giants from Microsoft and Amazon Web Services to ridesharing services Uber and Lyft, under a plan released Oct. 17. Vice President Joe Biden presented to President Barack Obama the final report of the cancer moonshot task force—an interagency group forming the federal plan to try to achieve a decade’s worth of progress in five years—along with his own personal report. The policy and regulatory changes in the task force report range from new drug approvals to patent reform, the arts, defense research and the environment, said Greg Simon, the executive director of the cancer moonshot task force. Simon also announced a number of private-sector initiatives.

“Today marks a banner day for the cancer moonshot with the release of the task force report,” Simon said. By culminating the work of more than 20 White House Cabinet and subcabinet agencies that have been meeting since February, he said, the report sets “a new standard for what it means to be involved in the fight against cancer.” The report itself said the task force marks the first time this many government agencies are collaborating to “to tackle the challenges along the spectrum of cancer research and care to improve outcomes for patients.”

Biden, who is leading the moonshot initiative, said medical technologies and treatment plans had progressed rapidly, even since his late son Beau was diagnosed with and later succumbed to cancer. “The fundamental thing I’ve come away with is there is a need for a greater sense of urgency because there are available answers now to some cancers and there is enormous opportunity in sharing data,” Biden said at a White House event to release the moonshot reports.

Ditch Obamacare Risk Corridor Suit, House Says

Federal lawmakers trying to avert “a massive giveaway of taxpayer money” said in a proposed brief that insurers are not entitled to recover funds under an Obamacare risk-sharing program (Health Republic Ins. Co. v. United States, Fed. Cl., No. 16-cv-259, proposed brief filed 10/13/16). The House on Oct. 13 filed a proposed friend-of-the-court brief in the U.S. Court of Federal Claims, saying the court should reject the first lawsuit by insurers seeking payments from the federal government under the Affordable Care Act’s risk corridor program.

The government’s failure to pay an alleged $5 billion under one of three ACA safety valve programs has insurers calling foul. The risk corridor program was intended to help insurers over the hump of adding higher-risk members, and the payment failure has been blamed for the demise of numerous insurers, including Consumer Operated and Oriented Plans formed under the ACA. A federal court already shut down the administration’s plan to reimburse insurers for ACA cost-sharing reductions, saying in a decision in another House lawsuit that the lack of a Congressional appropriation made the payments unlawful (93 DTR K-2, 5/13/16). That decision has been appealed.

Feds Expand Health Record Oversight Despite Pushback

The Obama administration moved forward with a final rule expanding federal oversight of electronic health records, despite opposition from the technology industry and Congress. The changes in the final rule (RIN:0955-AA00) allow the Office of the National Coordinator for Health Information Technology to directly review federally certified EHRs and other health information technologies, rather than rely on contractors.

Having greater oversight of federally certified EHRs will allow the agency to ensure that the technology is working properly and will not compromise patients’ safety, Vindell Washington, the national coordinator for health IT, said Oct. 14. “More transparency and accountability in health IT is good for consumers, physicians, and hospitals,” he said.

Some health IT industry observers warned that the ONC is overstepping its authority, echoing concerns by lawmakers made shortly after the agency first proposed the changes. Republican leaders of two congressional committees with health-care program oversight responsibilities challenged whether the ONC had the authority to respond directly to complaints about certified EHR systems in a July letter to the agency. Health IT industry groups have said they are worried the agency is seeking overly broad and ambiguous authority over federally certified EHRs and other health IT.

The ONC has repeatedly defended the rule and its authority to take a more direct role in overseeing its certification program. Currently, a few designated organizations in the private sector—known as ONC-authorized certification bodies (ONC-ACBs)—ensure that the thousands of certified EHRs being used by doctors are working properly. Doctors must use federally certified EHR systems to gain credit for participating in various Medicare payment schemes, including the meaningful use program and the upcoming Merit-based Incentive Payment System.

The final rule was published in the Federal Register Oct. 19.

John Zang Contributed to this report