The Insurance Market Regulations in the Republicans’ Health Care Bill: Crippling Obamacare, or Passing a Hot Potato to State Governments?

By David Gamage

On Monday, the House Republicans finally revealed their draft bill to “repeal and replace” the Affordable Care Act (#Obamacare or #ACA). The bill is titled the American Health Care Act, and commentators have been referring to it as either the #AHCA or #Trumpcare.

To assess the bill, it is helpful to think of it as consisting of four primary buckets:

  1. ending many of Obamacare’s tax provisions (read: large tax cuts for the very wealthy);
  2. phased-in cuts to Medicaid funding and scheduled devolution of Medicaid to the states (read: eroding the health safety-net program for the poor);
  3. transforming Obamacare’s other major health subsidies from being based mostly on income and health costs to being based more on age (read: the implications of this are actually less straightforward than what much of the commentary suggests, but that is a topic for another day); and
  4. other changes to Obamacare’s insurance market regulations (the subject of today’s blog post).

In this blog post, I will focus on the fourth bucket—the changes to Obamacare’s insurance market reforms other than the changes to the subsidies. Time permitting, I hope to write future blog posts on some of the other buckets.

What is most striking about the AHCA’s insurance market changes is how they keep the vast majority of Obamacare’s reforms in place. Right-wing groups have thus taken to calling the AHCA “#ObamacareLite”. Yet I consider this a misnomer. A more accurate label would be #ObamacareCrippled.

The AHCA’s changes do not really water down Obamacare, as the intended slur of “ObamacareLite” implies. Rather, the AHCA’s changes would likely cause Obamacare‘s framework for regulating the individual market to fall apart. If the AHCA bill were to be enacted in its current form, the result would likely be adverse-selection death spirals. The only real hope for saving the individual market would be for state governments to step up with new state-level regulations for supporting insurance markets within each state.

Continue reading “The Insurance Market Regulations in the Republicans’ Health Care Bill: Crippling Obamacare, or Passing a Hot Potato to State Governments?”

It’s Complicated.

By: Shu-Yi Oei

I’ve been thinking a lot about movies lately, partly because this pesky sign appeared outside my house a couple of days ago, and partly because of the Louisiana film tax credit, which has been all over the local news.

film sign 2

A couple of days ago, an Associated Press article reported that Louisiana’s motion picture industry was down by 90% this year as filmmakers moved production to states with more generous tax incentives. (I guess that puts the filming outside my house in the 10%?). It was also reported that Governor John Bel Edwards and the Louisiana Economic Development agency are going to commence an examination of the film tax credit and its economic impact in Louisiana. As the news reports indicate, the decline in movie production activity is undoubtedly due to the fact that, facing a state budget deficit, legislators placed caps and limitations on the credit in legislation passed last year. The most material change was an aggregate $180 million cap on the credit for tax years 2015-18, which will then sunset. RS: 47:6007(C)(1)(d)(ii). As a result, movie production has reportedly moved to states with more generous film tax incentives.

The Louisiana film tax credit is a complex beast, and I can’t cover all its intricacies here. But some broad policy points are worth mentioning. Continue reading “It’s Complicated.”

State Tax Reform Amidst Cajun Sausage Making

Steven Sheffrin
Professor of Economics & Director of the Murphy Institute, Tulane University

It was not quite Cajun boudin being prepared in Baton Rouge this winter and spring, but the sausage being concocted in the Louisiana Legislature was equally spicy. With low oil prices and years of “creative” budgets under Governor Bobby Jindal, the new Governor, John Bel Edwards, and the Legislature faced an initial budget shortfall of roughly 16 percent of the state general fund for the next fiscal year. Three separate legislative sessions later, they did reach a balanced budget, although with less revenue than the Governor had wanted. The revenue raisers included a dizzying array of sales tax changes that only temporarily limited exemptions, temporary limits on the refundability of business credits, and various other “haircuts” for business. Not exactly the purest of tax reforms.

But buried in this avalanche of legislation were some serious reforms of the Louisiana corporate tax along the lines that my colleagues and I had recommended to the Legislature last year.

Continue reading “State Tax Reform Amidst Cajun Sausage Making”

Tax Policy and Puerto Rico’s Fiscal Crisis: An Insolvency Primer and Some Tax Things to Read

By: Shu-Yi Oei

I’ve been following the story of Puerto Rico’s default on its public corporation debt repayment obligations, which has been unfolding over the last several months. The latest happened on Monday, May 2 (well, technically Sunday), when Puerto Rico missed a major debt payment that was due to the bondholders of its Government Development Bank (GDB).

The topic has been well covered from the sovereign debt/insolvency angle over on Credit Slips, so I won’t go into that in detail here. As I understand it, the main points are these:

(1) Puerto Rico owes around $70 billion total outstanding debt to its creditors, of which a significant chunk is public corporation debt. Public corporations are corporations owned by the government of Puerto Rico. For example, the GDB is a public corporation.

(2) Unlike U.S. municipalities such as Detroit, Puerto Rico entities aren’t considered debtors for purposes of Chapter 9 of the U.S. Bankruptcy Code. They therefore don’t have access to the Chapter 9 municipal bankruptcy process. See 11 U.S.C. § 101(52). This is a bit of a head scratcher.

(3) In 2014, Puerto Rico’s legislature passed a law, the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, which created a mechanism analogous to Chapter 9 bankruptcy by which Puerto Rico public corporations can restructure their debt. See Puerto Rico Passes New Municipal Reorganization Act: Puerto Rico Public Corporation Debt Enforcement and Recovery Act, 2014 P.R. Laws Act. No. 71, 128 Harv. L. Rev. 1320 (2015).

(4) Some bondholders filed a lawsuit, contending that Chapter 9 of the U.S. Bankruptcy Code preempts the Recovery Act. The First Circuit ruled that the Recovery Act is preempted. Franklin California Tax-Free Trust v. Puerto Rico, 805 F.3d 322 (1st Cir. 2015). The Supreme Court granted cert and heard oral arguments on March 22, 2016. No decision yet. For one scholar’s take on the issue, see Stephen J. Lubben, Puerto Rico and the Bankruptcy Clause, 88 Am. Bankr. L.J. 553 (2014).

(5) In light of all this, some have called for U.S. Congressional action, and there’s been legislation drafted to address Puerto Rico’s fiscal crisis that will allow for both restructuring and reform going forward. The House Committee on Natural Resources put forth a draft bill, the Puerto Rico Oversight, Management & Economic Stability Act (“PROMESA”). See also here for a helpful executive summary that accompanied an earlier draft. So far, that legislation has stalled, but they’re still trying.

There are many important issues in play, about which various stakeholders and commentators disagree. Some big ones are: (a) whether the draft PROMESA legislation raises retroactivity issues that make it unfair to bondholders (including mutual funds and their investors) who may be subject to restructuring ex post without having had notice of that possibility ex ante; (b) relatedly, whether creating a bankruptcy-like restructuring process for Puerto Rico is bad for bondholders because it prevents holdout creditors from holding up restructuring negotiations, (c) how much oversight and sovereignty Puerto Rico should cede (for example, different stakeholders feel differently about the installation of an oversight board); (d) the extent to which austerity measures are feasible and should be imposed [fn1], and (d) and what substantive reforms should be put enacted going forward.

So where does tax come in?

Continue reading “Tax Policy and Puerto Rico’s Fiscal Crisis: An Insolvency Primer and Some Tax Things to Read”