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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 9/9/13

Posted in Judicial Process, Regulatory Process

A short business week was punctuated with a concession by the Securities and Exchange Commission (SEC) that it will not to appeal an adverse decision, while litigation against a related SEC rule may speed up.  In the agencies, the Internal Revenue Service (IRS) proposed two new reporting rules for employers and health insurers under the Patient Protection and Affordable Care Act (ACA); while the IRS says that it has sent the critical Paperwork Reduction Act (PRA) request and data to the Office of Management and Budget (OMB), this critical data is not yet available for public comments.  The Environmental Protection Agency (EPA), on the other hand, withdrew two significant Toxic Substances Control Act (TSCA) proposed rules from very long term OMB review.  OMB will have much to do, however, including interagency review of a Department of Health and Human Services (HHS) privacy / criminal background check proposal.

Conflict Minerals & Payments:  Spokespersons for the SEC indicated on September 3rd that the Commission would not appeal the United States District Court for the District of Columbia decision in American Petroleum Institute v. SEC, vacating its minerals payment disclosure rules and will rewrite the regulations.  The announcement came on the last day for the SEC to appeal.  The SEC will revise the rule.

On the opposite side, the appellants in National Association of Manufacturers v. SEC have requested expedited appellate review of the District Court decision upholding the SEC’s conflict minerals rule.  This case was originally filed in both the United States Court of Appeals for the District of Columbia and in its district court as a jurisdictional precaution; the Court of Appeals granted expedited consideration but found that it did not have jurisdiction.  Given the high cost, volatility of the issue, and the past grant of expedited review, it is likely that the court will grant expedited review again.

Employer ACA Health Care:  The IRS today published Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans and Information Reporting of Minimum Essential Coverage proposed rules, but has yet to release the associated PRA data.  The Employer-Sponsored Plans proposal would establish detailed requirements under the ACA for employers to report to the IRS information about their compliance with the employer shared responsibility and about the health care coverage they have offered employees.  The requirements fit with the employer’s furnishing related statements to employees so that employees can determine whether, for each month, they can claim a premium tax credit.  The proposed regulations affect large employers (generally meaning employers with 50 or more full-time employees (FTE) – in this case, 30 hours per week or more.  The proposed rule includes an application date consistent with the Administration’s July announcement that it would delay penalties for employers that do not provide insurance to their workers came until 2015:  the rule would be applicable for calendar years beginning after December 31, 2014.  The proposed regulations governing the information reporting requirements for providers of minimum essential health coverage complement the employer reporting requirements.

In unfortunately typical lack of style, the proposed rules are poorly written, dense, unhelpful, and uninformative.  Both rules must interlock also with rules for individual shared responsibility for health care insurance costs – the individual mandate that has been so hotly disputed.  These proposals are effectively incomplete without the PRA data – regulated entities cannot effectively comment on the rules without the specific data requirements.

Chemicals of Concern:  The EPA withdrew the aged TSCA Chemicals of Concern List and CBI: PMN Amendments Claiming Chemical and Microorganism Identity as Confidential in Data From Health and Safety Studies Submitted Under TSCA Prior to the Commencement of Manufacture proposed rules from OMB review.  The Chemicals of Concern proposed rule was originally submitted on May 12, 2010, while the CBI (confidential business information) proposed rule was submitted on December 27, 2011.  EPA withdrew the drafts from OMB review quietly, apparently with no announcement, but press reports suggested that EPA withdrew the Chemicals of Concern proposal because it had become obsolete in light of other actions taken by EPA, and withdrew the CBI proposal because EPA feared that requiring submission and then disclosing confidential business information would chill companies’ submission, leaving EPA will less information and greater enforcement problems.

Not surprisingly, the withdrawals quickly generated heated reactions – industry praising the decision, environmental groups panning it.  Neither rule was considered to be economically significant, but both clearly involve significant policy and legal issues.  EPA’s admission that it has rendered obsolete its own draft proposed rule takes some courage – such admissions run contrary to the normal bureaucratic turf-defense response – but the 3½ year review suggests that the draft rule had substantial problems and was under substantial political pressure.

EPA is also quite right that business will (and must) balance enforcement strategy against being required to provide the government with confidential business information so that the government can publicly release it to competitors.  Surely this was never EPA’s intent, but it could well have been the result.  No one affirmatively desires to violate the law, but releasing CBI means any agency will not receive that CBI except under duress.

HIPAA & Criminal History:  The Department of Health and Human Services (HHS) submitted a proposed HIPAA Privacy Rule and the National Instant Criminal Background Check System (NICS) rule to OMB last week.  HHS published an advanced notice of proposed rulemaking – i.e. an information request – in April, and this proposed rule may relieve some of the conflict in data security and privacy regulations as part of the Administration’s larger efforts to curb “gun violence.”  Interagency consideration can be complicated when one agency requires data that another agency prohibits from disclosure, so OMB’s role as policy conflict resolution coordinator will be critical.