Major Policy Developments for the 114th Congress: CYBERSECURITY

Cybersecurity.

The increasing and nearly daily occurrences of cybersecurity attacks against both public and private sector entities that service the every- day lives of Americans  continues to raise the importance of addressing cybersecurity issues head on. Members of Congress feel a level of frustration about the lack of movement on legislation as they seek to balance security with privacy. Members of the House and Senate continue to work together to seek
ways to pass cybersecurity bills in the lame duck session. Member retirements in key leadership  roles, such as with Chairman Rockefeller in the Senate and Chairman Rogers in the House, could spur action, as  they face a crowded calendar of “must- do” bills. Given the odds against anything being approved  this year, anticipate that enactment of cybersecurity legislation will again be a top issue for  the 114th Congress. Also expect continued executive action by the President as a means to move the ball forward on this issue while the Congress continues to work through the process. With few  exceptions, the key congressional players engaged in cybersecurity– related initiatives in the last Congress will remain the same and will provide some continuity for the public and private sector participants who have been closely following the process.

Efforts focused on increased cyber information sharing and associated liability protections will continue in both chambers, with the expectation that leading Members in both the House and Senate will again introduce bills in the various committees. With a new chairman at the helm of the House Permanent Select Committee on Intelligence, the approach pursued by the leadership of the  committee may vary given private sector privacy concerns and continued White House opposition to  the proposed Cyber Intelligence Sharing and Protection Act (CISPA). The Senate has moved forward
with information sharing legislation in a bipartisan fashion in the past. Anticipate that approach will continue.

Anticipate introduction of bills in the 114th Congress similar to those we have seen in the past, such as those focusing on the need to strengthen the capabilities of the U.S. Department of Homeland Security (DHS) in the area of cyber—maintaining a  civilian agency as a partner to the private sector. Others will include a focus on codifying the
mandate of: the National Cybersecurity and Communications Integration Center (NCCIC), strengthening the hiring abilities of DHS to build and maintaining a cybersecurity workforce, increasing investments in cybersecurity research and development, and updating the Federal Information Security Modernization Act (FISMA).

The annual appropriations bills will also continue to be a vehicle for moving cybersecurity-related provisions, including language that restricts purchases from specifically targeted Chinese entities based on supply chain security issues that were included in the House’s FY 2015 Commerce-Justice-Science appropriations bill.

At the end of the day, it is clear that the Obama Administration will continue to use its executive authority to address cybersecurity concerns and will remain actively  engaged in the implementation of the February 2013 Cybersecurity Executive Order (EO) 13636 and  Presidential Policy Directive (PPD-21). The release of the Cybersecurity Framework in 2014, almost exactly a year from the issuance of EO 13636, and the recently issued EO on data security, signals  that other EOs may be in the works and should be closely watched.

Since the issuance of EO 13636, almost every department and independent agency has taken an active role on cybersecurity issues in the last nearly two years as  concerns grow over the impact of cybersecurity attacks on the sixteen Critical Infrastructure (CI)
sectors defi in the EO. The Securities and Exchange Commission (SEC), for example, has begun  spot checks of companies to ensure adequate fillings on cyber risk. The Federal Trade Commission (FTC) has filed 53 lawsuits against hotels and retailers using its consumer protection authorities, and is seeking greater enforcement and rulemaking powers  from Congress. The Federal Communications Commission (FCC) has begun eff to look at ways to  address the lack of existing cybersecurity regulations on the communications sector. It is safe to  say that there will be an increasingly activist oversight role by every one of these agencies in  the last two years of the Obama Administration.

On the international front, concerns in a post-Snowden world have tied together the bilateral and multilateral negotiations on cybersecurity and privacy. The European  Union is working on its own cybersecurity regime under the Network and Information Systems (NIS)  Cybersecurity Directive along with the European Program for Critical Infrastructure Protection. The North Atlantic Treaty Organization (NATO) recently issued a statement about rules  of engagement on a cyber-attack. The Russian and Chinese governments recently reaffirmed the principle of national sovereignty in cyberspace. Expect more discussion in the international  realm on cybersecurity and privacy issues as governments focus more attention on the balance needed between security and
privacy protections.

Greek Parliamentary Vote for New President Fails Again-WHAT IT MEANS

Greek Parliamentary Vote for New President Fails Again… The New Democracy’s candidate for President failed to get enough votes to take office, for the second time in two weeks. If he fails to get enough votes on December 29, Greece will hold snap elections where the current Prime Minister could lose his position.

What it means — This is definitely high drama. The ruling party, New Democracy, is led by Samaras, who has abided by the requirements of the Greek bailout that were set down by the troika from the European Union and the European Central Bank.

If Greece holds nationwide elections, current polling suggests that the far-left Syriza party would win. This group has denounced the troika and its austerity measures for years and called for greater spending on social programs. An election favoring Syriza would send Greece into a tailspin that might see the country leave the euro. This would make for a very unpleasant surprise right before the New Year.

Major Policy Developments for the 114th Congress: HEALTHCARE POLICY

Major Policy Developments

With Republicans enjoying a narrow majority in the Senate, healthcare policy priorities will begin to shift in the 114th Congress, with divergent paths for both the ceremonial and practical. Senate Minority Leader Mitch McConnell (R-KY) has indicated he would like to “clear the decks” of must-pass legislation in the lame duck session to allow the new Republican majority to focus on policy priorities and advance legislation next year. The healthcare policy agenda in the new Congress will continue to focus on implementation of the Patient Protection and Affordable Care Act (ACA), as deadlines for major elements of the law and significant rulemaking proceed at a rapid pace. The new Republican majority in the Senate, however, marks the first real opportunity for Congress to consider and approve changes to President Obama’s signature policy achievement.

First on the agenda in the new year will be a revived attempt to repeal the healthcare reform law,which the House has considered in some form over fifty times in the last four years. As in the past, a full repeal vote will be purely symbolic and would certainly face a presidential veto. Congressional Republicans also would have an opportunity to move from ACA repeal votes to consider “replace” health reform legislation.

With a repeal (and possibly replace) vote behind them, the Republican Congress can address more attainable ACA changes. A handful of reforms likely to be considered earned bipartisan support in the 113th Congress, but failed to advance with the Democratic majority in in the Senate, which feared that approving any changes to the law would undermine their prospects in the mid-term elections. Senate Republicans
are still well short of the 60 vote super-majority and will have to identify proposals that actually stand a chance of being signed into law. Their best hope to change the ACA before 2016 will be to focus on provisions that can draw Democratic support with a goal of improving the law rather than undermining it. Such proposals could include a repeal of the medical device tax, changing the “full-time-employee” definition for purposes
of employer responsibility and health insurance coverage, and changes to consumer friendly health care tools like flexible spending accounts (FSAs).Rising insurance premiums may encourage congressional Democrats to support legislation that would allow Americans to keep the coverage if they like it, without a penalty for failing to meet the law’s qualified health insurance benchmarks. Republicans could also attempt to revise the risk corridor program, which allows for additional federal payments to insurers that enroll a disproportionate number of sick (and expensive) patients, and has been criticized as a bailout for the health insurance industry.Other provisions likely to see congressional activity and debate, but without robust crossover political appeal, include repeal of the Independent Advisory Payment Board (IPAB), religious exemptions, and repeal of the individual mandate (which earlier this year scored $35 billion in savings, making it an appealing offset for other policy priorities).

Next year also marks the implementation year of a number of ACA provisions that have been delayed, including the employer mandate, large employer reporting requirements, and minimum essential coverage reporting by insurers. The administrative delay of the employer mandate drew fire from congressional Republicans, prompting a potential lawsuit that would accuse the White House of abuse of executive authority and skirting the issue in advance of the mid-term elections. Large employers have already responded to the impending mandate by cutting workers’ time or, in some cases, dropping employer-sponsored plans all together.

The new Senate majority could drive the issue with an aggressive push for repeal or another delay. Changes to impending reporting requirements, however, offer a middle ground option to address concerns of mid-size business struggling to adhere to the rules. Reconciliation offers another avenue to address ACA changes, with the added irony that the same procedural maneuver was used by congressional Democrats to move healthcare reform in 2010. Reconciliation will be an attractive option to the slim Republican majority in the Senate as the process limits debate in the Senate to 20 hours, and doesn’t require the 60 votes necessary to break a filibuster. But there are limits to this approach under Senate precedent, as embodied in the Byrd Rule, which in theory limits reconciliation to provisions with a budget impact and does not allow for inclusion of extraneous policy provisions. As with other legislative initiatives, the Senate Republican majority will have to carefully balance priorities of the conservative House majority with what the Obama Administration is willing to sign into law.

Anticipated Congressional Committee Developments

Expect Senator Orrin Hatch (R-UT) will lead the Finance Committee in the 114th Congress, with Senator Ron Wyden (D-OR) serving as Ranking Member. Senator Pat Roberts (R-KS), having narrowly defeated his challenger following a tumultuous election year, will serve as Chairman of the Subcommittee on Healthcare, with Senator Debbie Stabenow (DMI) rising to the Ranking Member position with the retirement of current

Chairman Jay Rockefeller (D-WV). The Senate Committee on Health, Education, Labor and Pensions (HELP) will see Senator Lamar Alexander (R-TN) taking over as Chairman of the full committee and Senator Patty Murray (D-WA) as Ranking Member.
Senator Susan Collins (R-ME) will assume the Chairmanship of the Special Committee on Aging, with Senator Bill Nelson (D-FL) serving as Ranking Member.

In the House, Representative Fred Upton (R-MI) will continue to chair the Energy and Commerce Committee with Representative Joe Pitts (R-PA) serving as Health Subcommittee Chair. With the retirement of Representative Henry Waxman (D-CA), two Members are vying to serve as Ranking Member: Representatives Anna Eshoo (D-CA) and
Frank Pallone (D-NJ). Selection of the Ranking Member of the Health Subcommittee will follow caucus votes on the full committee Ranking Member position.
With Representative Dave Camp’s (R-MI) retirement as Chairman of the House Ways and Means Committee, the committee will be under new leadership next year. Representatives Paul Ryan (R-WI) and Kevin Brady (R-TX) are both pursing the gavel. Both Members have been actively engaged in healthcare policy, with Representative Brady serving as the
current Health Subcommittee Chair, and Representative Ryan’s leadership on entitlement reform showcased in previous budget proposals. Representative Sandy Levin (D-MI) will continue on as Ranking Member.

NJ Senate Panel OKs Easing Rules For Boutique Casinos

A New Jersey Senate committee on Thursday approved legislation to establish a pilot program aimed at bringing smaller-scale casinos to Atlantic City, the latest legislative effort to prop up the city’s struggling economy in the wake of several major casino closures.

The New Jersey Senate’s Government, Wagering, Tourism & Historic Preservation committee voted unanimously to approve S-366, which would require the state’s Casino Control Commission to launch a pilot program to issue small-scale casino licenses and “staged casino” facility licenses in Atlantic City. The bill is designed to lower the requirements set forth under a 2011 law aimed at attracting smaller, “boutique” casinos, a move that failed to attract interested parties.

In January 2011, Gov. Chris Christie signed legislation to allow for two new casino projects in Atlantic City, one of which could have as few as 200 guest rooms, rather than the 500 room-minimum typically required by state law. S-366 would establish a pilot program to further relax those restrictions, removing a requirement that one of the facilities eventually expand to 500 rooms.

If passed, the bill would also remove the requirement that the boutique casinos be newly constructed, allowing for the establishment of “staged” casino facilities in renovated, existing buildings instead of new ones.

S-366 will head next for a vote by the full Senate.

The bill, introduced by Senate President Steven Sweeney, D-Gloucester, and Sen. Joseph Kyrillos, R-Monmouth, was first introduced in January, but languished in committee all year. It gained steam following the closures of several Atlantic City casinos this year, which has sent the city’s economy into a state of free-fall, with an estimated 8,000 jobs already lost and possibly more to come.

A fourth casino, the Trump Taj Mahal, is on the verge of becoming Atlantic City’s next shuttered gaming establishment, as the property battles a workers’ union over its collective bargaining agreement. Should Trump Taj Mahal fail to strike a deal with its workers, the property would join the Showboat Atlantic City, Trump Plaza and the Revel Casino Hotel.

Revel was sold at auction, but the prospective buyer, Brookfield Property Partners, withdrew its $110 million bid due to the property’s conflict with its utility provider.

Senate Passes $1.1T Spending Bill

The U.S. Senate on Saturday passed a $1.1 trillion omnibus spending bill for 2015, averting the closure of some parts of the government despite significant pushback against a contentious measure repealing much of the Dodd-Frank Act’s “swaps push-out” rule.

Senators voted 56-40 in favor of the bill late Saturday after a contentious day, sending it on to President Barack Obama — who previously signaled that he would sign it into law — and ending the threat of a “government shutdown” for a second year in a row.

On the Senate floor, some lawmakers urged their colleagues to vote for the bill so as to avert a “damaging” government shutdown, often while simultaneously criticizing various provisions in the legislation — including multiemployer pension plan reforms, cuts to the U.S. Environmental Protection Agency’s budget and a clause loosening election campaign contribution limits.

The most contentious of those provisions was a clause meant to significantly pare back the swaps push-out rule, a Dodd-Frank Act measure that requires banks to split off most of their derivatives trading — except for some limited types of such transactions and derivatives deals used for hedging risk — into subsidiaries that can’t draw on federal support in the event of a failure.

Sen. Elizabeth Warren, D-Mass., had been the most prominent of these critics, and she continued to rail against the bill on the Senate floor Friday.

The measure, which Warren alleged had been drafted by Citigroup Inc. lobbyists, was an example of Citi’s “unprecedented” grip on financial policymaking through both lobbying and its ties to officials in the White House, U.S. Department of the Treasury, Federal Reserve and other federal agencies, she argued, sharply criticizing the banking giant.

The swaps push-out provision had been similarly contentious for House lawmakers, serving as the main sticking point that held up the bill’s passage Thursday, with supporters and opponents in both parties laying out their reasons — behind closed doors — for more than seven hours after the floor debate ended.

House leaders ultimately reconvened the lawmakers at around 9 p.m., and the legislation narrowly passed in a 219-206 vote with the support of an unusual coalition of Democratic and Republican lawmakers. That was followed by a temporary continuing resolution, or CR, giving the Senate time to consider the bill without government funding authority expiring.

The spending bill has been unofficially dubbed the “cromnibus,” as an omnibus combination of 11 out of 12 regular appropriations bills normally considered by Congress each year, alongside a CR funding the U.S. Department of Homeland Security through February, amid an immigration dispute between Republican lawmakers and the administration.

The bill provides for a total of $1.1 trillion in spending for fiscal year 2015, including $1.014 trillion in baseline discretionary spending — in line with an earlier budget agreement for 2014 and 2015 — as well as nearly $74 billion in so-called overseas contingency operations funding for the U.S. departments of Defense and State and about $12 billion in combined disaster and Ebola crisis aid.

Among the broad range of areas covered by the bill, the federal judiciary will get a boost, with federal courts receiving $6.7 billion, or $182 million more than in 2014. Financial enforcement agencies will also see increased budgets, with the U.S. Securities and Exchange Commission up $150 million to $1.5 billion — although its $25 million “reserve fund” has been eliminated — and the U.S. Commodity Futures Trading Commission up $35 million to $250 million.

Several agencies have lost out, however, even with a slightly increased top line over the $1.012 trillion allowed for fiscal year 2014. The Internal Revenue Service, for instance, will receive $10.9 billion for fiscal 2015, a cut of nearly $346 million, as well as explicit restrictions on what it can do with its funding, in response to controversies that have plagued the agency over the past few years.

The EPA will receive a $60 million cut, with a total budget of $8.1 billion, and be subject to restrictions on aspects of its oversight authority, amid Republican lawmakers’ complaints concerning alleged regulatory overreach.

HOUSE NARROWLY PASSES $1.1T SPENDING BILL

Late Thursday the U.S. House of Representatives narrowly passed a $1.1 trillion “cromnibus” spending bill, which included a multiemployer pension reform measure, despite lawmakers’ objections over a contentious alteration to the Dodd-Frank “swaps push-out” rule and the method of funding the U.S. Department of Homeland Security.

An unusual coalition of both Democratic and Republican House lawmakers voted 219-206 in favor of the bill Thursday night, sending it to the Senate, after nearly seven hours of closed-door negotiations as members of both parties debated the measure among themselves.

With a government shutdown looming Friday as current discretionary spending authority expires, House lawmakers also moved to pass a continuing resolution, authorizing a few days of temporary government funding to give the Senate time to consider the bill.

The spending bill will fund 11 of the 12 areas under Congress’ appropriations authority through the end of fiscal year 2015, with the exception of DHS, which will instead be funded on a temporary continuing resolution through the end of February.

But support from lawmakers Thursday was largely lukewarm, with House leaders only able to muster a narrow 214-212 procedural vote in its favor earlier in the day, as lawmakers expressed reservations about issues such as passing the legislation as an omnibus measure, the temporary funding given to DHS — the result of an ongoing battle between Republicans and the administration over immigration issues — and particular riders attached to the measure.

While a number of the more contentious riders that were initially expected to be in included in the bill — unofficially referred to as a cromnibus as a combination of an omnibus spending bill with the DHS continuing resolution — were removed when House and Senate appropriators earlier hammered out a compromise agreement, several such clauses were retained in the final legislation.

These included a measure allowing multiemployer pension plans to cut payments to beneficiaries in order to avoid running dry, which several lawmakers argued would help protect beneficiaries from having their pensions cut off entirely as the result of an avoidable plan bankruptcy, especially with the perilous financial state of the Pension Benefit Guaranty Corp., which backstops failed plans.

One of the pension measure’s authors, Rep. George Miller, D-Calif., said that such cuts could only be done in consultation between plan administrators and beneficiaries, and could not be imposed unilaterally. The rider to come in for the most criticism Thursday would significantly pare back the swaps push-out rule, a Dodd-Frank Act measure that requires banks to split off most of their derivatives trading — bar a limited subset of transactions and those used for hedging risk — into subsidiaries without federal support in the event of a failure.

The swaps push-out reform clause has also received sharp criticism from a number of senators, most prominently Sen. Elizabeth Warren, D-Mass., and will likely continue to be a significant sticking point as the Senate takes up the bill.

House Passes 6-Year TRIA Extension But With Dodd-Frank Changes

On Wednesday, the U.S. House of Representatives overwhelmingly passed a measure to extend for six years a federal terrorism reinsurance program that is set to expire Dec. 31, but the bill is likely to face considerable opposition in the U.S. Senate due to its inclusion of language to modify a noninsurance provision of the Dodd-Frank Act.

The House approved 417-7 an amended version of the Senate’s Terrorism Risk Insurance Program Reauthorization Act of 2014 that was unveiled Tuesday after extensive negotiations between House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Sen. Charles Schumer, D-N.Y. The only “nay” votes were cast by Republicans.

The American Insurance Association praised the House’s passage of the TRIA reauthorization and urged the Senate to pass the bill.

Wednesday’s sweeping vote in favor of the measure came despite House Democrats’ recent warnings against the bill’s inclusion of an unrelated proposal to tweak Dodd-Frank to allow end users, such as energy and agricultural companies, to avoid having to post margin on transactions conducted with regulated entities like swaps dealers and financial institutions if they use derivatives only to hedge “legitimate business risk” and not for speculation.

The end-user proposal passed the House by a large bipartisan majority, but Reps. Carolyn Maloney, D-N.Y., and Maxine Waters, D-Calif., said during a Tuesday hearing of the House Rules Committee that the Dodd-Frank language — which they said was not contemplated during negotiations — will be met with opposition in the Senate, making it difficult to pass a TRIA reauthorization bill before the program expires.

A representative for Schumer did not immediately respond to a request for comment late Wednesday. In a policy statement released Wednesday, the White House said that it supports the reauthorization of TRIA but “strongly opposes” the Dodd-Frank modifications.

The bill would extend the terrorism reinsurance program, which was established through the Terrorism Risk Insurance Act after the 9/11 attacks, for six years and would incrementally raise the trigger for reinsurance coverage from $100 million to $200 million beginning in 2016. The bill also provides for the creation of the National Association of Registered Agents and Brokers, a body made up of state insurance commissioners and insurance market representatives, to streamline the licensing of registered insurance agents and brokers.

The Senate’s TRIA reauthorization bill, which passed 93-4 in July, called for the program to be extended for seven years and made modest changes to the level of government support provided.

Meanwhile, the House version supported by Hensarling provided for the TRIA program to be extended for five years and included substantial changes. The bill, which passed out of committee in June but never made it to the House floor, envisioned bifurcating federal reinsurance coverage for conventional terrorist attacks and for nuclear, biological, chemical and radiological attacks and raising the trigger for coverage for conventional terrorism attacks from $100 million to $500 million in losses. The bifurcation language was not included in the amended bill.