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December 14, 2020 | Human Resources | Posted by Bob Greene, Senior HR Industry Analyst at Ascentis

Election Results are In: The Impact on Human Capital Management

As HR professionals seek out clues to the compliance, regulatory and best practice changes which will result from the Presidential election of 2020, consider the following:

  • While the White House has turned from Republican to Democrat, it appears that the Senate will likely remain in Republican control (to be determined by the two Georgia run-off elections on January 5, 2021), and the House will remain with a Democrat majority, albeit smaller than the current Congressional majority. The clear message from voters this year? We are still a politically divided country.
  • To judge from their party platforms in 2020, the two political parties are diametrically opposed on virtually every major topic of concern for HR professionals. These include: employer-provided health insurance and the ACA, gender pay equity, diversity and inclusion (and particularly D&I training), and non-citizen/guest worker visa management.

Given the above, it is reasonable for those of us in workforce management, HR and related fields to expect something of a “whiplash” effect - at least as it pertains to Presidential and other executive branch actions over the past four years.

An Activist Administration

The statistics about Executive Orders over the past 40 years, in context, tell an interesting story about the Trump Administration:

President Years in Office Executive Orders (EO) EOs Signed Per Year
Reagan 8 381 48
Bush Sr. 4 166 42
Clinton 8 364 46
Bush Jr. 8 291 36
Obama 8 276 35
Trump 4 195 (so far) 51

Of the current President’s 195 Executive Orders (so far), 91 were issued during his first two years in office – with a Republican majority in the House and Senate, and 104 so far in the most recent two years, with a divided Congress. But it is the subset of these Executive Orders that impact HR professionals on a day-to-day basis which will now be the focus of our collective “anticipatory scrutiny” – which will stay, which will go, and what new executive actions can we expect in the next several years?

Healthcare and the ACA

Separate and apart from the drama surrounding this year’s election, the ACA has been up for constitutional review, for a third time, in the Supreme Court, since late last year. A majority of commentators listening in during the oral arguments on Texas v California, which took place November 10, 2020, heard in the justices’ questioning some inferences that the law would be found constitutional a third time and remain the law of the land. SCOTUS’s opinion could be announced any time, but the Court has a habit of delaying its most anticipated and impactful rulings until the end of their term in late June. In any event, the earliest any Supreme Court decision on the ACA could impact employer-provided health plan provisions and contract pricing would be for the 2022 renewal year.

President Trump has been critical of the Affordable Care Act and did what he could to repeal and replace it. When that didn’t happen over the past 4 years, he has done what he can within the executive branch to weaken the law. The President’s two Executive Orders, E.O.13765, “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act” (signed 1/20/2017), and E.O.13813, “Promoting Healthcare Choice and Competition Across the U.S.” (signed 10/12/2017) directed his cabinet secretaries to develop competitive, narrower coverage, presumably less expensive, alternative healthcare plans not subject to some of the ACA’s quality guarantees. These included:

  • Expansion of Association Health Plans (AHPs). The basis of this expansion, sometimes referred to as “Pathway 2 AHPs” to distinguish them from those designed under prior rules, has been challenged in court and they remain “in limbo” pending a final Appeals Court determination.
  • Expansion of Short-Term Limited Duration Plans (STLDIs). As a result of these two Executive Orders, HHS expanded STLDIs from a maximum 90 days of coverage, non-renewable, to a maximum of 364 days of coverage, renewable up to 36 months. These plans can now exclude pre-existing conditions, exclude some of the ACA’s 10 minimum essential coverage categories, and re-introduce annual and lifetime claim limits. STLDIs were challenged in court on the basis that they would compete with ACA-compliant plans and exacerbate adverse selection by younger, healthier individuals, but they were found to be within the authority of HHS to expand. In response, several states have curtailed or outlawed the sale of STLDIs within their jurisdictions.
  • Creation of “Excepted Benefit” Health Reimbursement Accounts (EBHRAs) and Individual Coverage Health Reimbursement Accounts (ICHRAs). Under the Obama Administration, IRS Notice 2013-54, was a “nail in the coffin” for standalone HRAs, integrated with individual health policies purchased by employees (aka “employer payment plans”) satisfying the ACA’s employer mandate, hitting them with daily excise taxes of $100 per participant per day. In guidance issued by the Trump Administration October 23, 2018, both EBHRAs and ICHRAs, effective January 1, 2020, could be used to fund non-ACA compliant plans, restoring the equivalent of employer payment plans to legal status. These new HRAs can be used to fund non-ACA compliant companion health plans.

Since it is apparent that the inbound Biden Administration fully supports the ACA and potential improvements to it, to the extent that these new and modified plans pursuant to these two Trump Administration Executive Orders allow for exceptions to the ACA’s quality and affordability mandates, we should expect those provisions to be reversed.

HCM Implications: With the uncertainty attendant to the Supreme Court’s deliberations, as well as the two political parties on Capitol Hill being so far apart on healthcare policy, employers may want to return to more traditional considerations for employee insurance planning: competitive principles of talent attraction and retention, cost containment, and corporate responsibility for the well-being of employees and their families. Basing plan changes on the expectation that one party or the other will retain power for more than two or four years at a time seems particularly risky at this juncture.

Diversity and Inclusion

As multiple HR surveys indicate that Diversity and Inclusion is a top priority for many employers in 2021, we can expect nothing less than a sea change in both messaging and policy from Washington. Of the various policies that the Trump Administration implemented, two are most likely to be reversed in the first year of the Biden Administration:

  • On September 22, President Trump signed O.13950 “Combating Race and Sex Stereotyping,” which among other things, banned certain concepts from future D&I employee training, for all 4.3 million federal employees, as well as millions more employees of federal contractors. In two follow-up memoranda from the Office of Management & Budget (M-20-34 and M-20-37), which detailed the prohibited content, including concepts like “systemic racism” and “white privilege” which must be censored out of D&I training. President-Elect Biden and the Democrat party platform have taken an approach almost diametrically opposed to this – encouraging a full scope of diversity and inclusion training and announcing that addressing systemic racism would be one of his “First 100 Days” priorities. It is reasonable to expect some form of rescission of E.O.13950 to be part of those priorities.
  • More than 90% of employers responsible for the annual EEO-1 report filing spent many hours, between August, 2019 and February, 2020, completing their first exercise in collecting, editing, checking and reporting on “EEO-1 Component 2” data, which broke down race and sex headcounts by a series of prescribed compensation and total hours worked ranges. The reporting of this information (for both 2017 and 2018) had first been mandated by the EEOC under the Obama Administration. It was designed to begin addressing the national gender pay gap of close to 20% overall, which has not closed significantly in the last 1-2 years.

Source: Business Insider 8/26/20 (2018 data)

The Trump Administration fought in federal court to cancel the requirement before the first reports were due, but lost that fight. Despite a July 2019 unanimous vote by the EEOC to fund a statistical study of the collected Component 2 data, in November 2019, the Office of Federal Contract Compliance Programs (OFCCP) published, in the Federal Register, its intent to end collection of Component 2 data, and not to use any of the already collected pay data for any purpose, because it “…does not expect to find any significant utility in the data.”

The President-Elect, as well as the Democrat party platform, have made clear that gender pay equity will once again regain priority status in the new administration. Indeed, the election of Kamala Harris as the first-ever female Vice-President and the nomination of Janet Yellin as the first-ever female Secretary of the Treasury represent two large new cracks in the “glass ceiling.”

The House had passed H.R.7, “The Paycheck Fairness Act” in the first days of the current Congress, and it would have codified into law the same Component 2-like reporting that employers have already produced. H.R.7 was, of course, stalled in the Senate and never went to the floor for a vote, but whether by a turnover of the Senate in the January runoffs, or by administrative fiat by the executive branch alone, employers should expect Component 2 reporting to return, as well as a possible announcement of use of the already-collected data to give us a better picture of the industries and regions doing better (and worse) on the gender pay equity front.

HCM Implications: The likelihood of the return of EEO-1 Component 2-like reporting is clear. Additionally, gender pay equity is moving forward on other fronts as well. On December 1, 2020, the NASDAQ Over-the-Counter stock exchange announced proposed new rules, expected to be approved by the SEC, requiring all 3,000 member companies to ensure female, LGBTQ and/or other minority representation on their boards of directors, or face delisting of their stock. Previously, these types of requirements have largely originated and been enforced only at the state level (e.g., California S.B.826.)

Immigration and Work Visa Processing

In perhaps no other area has the Trump Administration been more activist with executive orders impacting employers than guest workers and visas.   From E.O.13788 “Buy American and Hire American,” to Presidential Proclamation 10014, “…Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market…,” the administration has actively discouraged the issuance of various types of work visas, particularly H-1B visas. Actions have included:

  • year-on-year increases in both visa denials and requests for evidence (RFEs),
  • plans to discontinue issuance of Employment Authorization Documents (EADs) for H-4 visa holders (spouses of H-1B visa holders) – not yet fully implemented,
  • the above-referenced Presidential proclamation 10014 attempting to end all inbound work visas from April 2020 forward (struck down by the courts in early October this year),
  • increases in visa application fees and related costs, and
  • an attempt, announced just days before the November election, to end the 30-year old H-1B visa lottery system and replace it with a program of ranked preference by compensation level of the position being filled, from highest to lowest.

While the inbound Biden administration has not been specific about these Trump Administration rule changes and which may be reversed when, once again they’ve offered clues in their announcements during the transition. President-Elect Biden nominated a Latino immigrant, Alejandro Mayorkas, as his Secretary of Homeland Security (which oversees USCIS, the agency largely responsible for work visa enforcement), and there has been federal court action on the DACA (Deferred Action for Childhood Arrivals) program as well, with applications being accepted again for the first time since September 2017.

HCM Implications: Employers dependent on visa-based workers (particularly the very popular H-1B visa) should expect a significant loosening of restrictions to be a first-year priority for the new administration.

To gain a deeper dive into the topics discussed throughout this blog, please check out our webinar, “The People Have Spoken! How Will the Election Results Impact HCM?

 

 

Bob Greene currently serves as Senior HR Industry Analyst at Ascentis. Bob’s 40 years in the human capital management industry have been spent in practitioner, consultant and vendor/partner roles. As practitioner, he managed payroll for a 5,000-person bank in New Jersey. As consultant, he spent 8 years advising customers in HRMS, and payroll and benefits system design as well as acquisition strategies. Bob also built a strategic HCM advisory practice for Xcelicor (later acquired by Deloitte Consulting.)