Pierluisi appeals oversight board’s rejection of four laws

By The Star Staff

The administration of Gov. Pedro Pierluisi Urrutia has appealed to the U.S. First Circuit Court lower court rulings that validated the federal Financial Oversight and Management Board’s rejection of four commonwealth laws that, according to the government, were designed to benefit the people of Puerto Rico by ensuring affordable access to health care and prescription drugs and providing public workers with additional opportunities to spend vacation time with their families.

According to the appeal, the oversight board has never explained the standards it uses to determine whether a new law impairs or defeats the purposes of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) or the reasons a new law is “significantly inconsistent” with the governing fiscal plan.

“When the Title III court asked counsel for the Board about that standard at oral argument, counsel replied ‘I’m just a lawyer’ and referenced the level of analysis ‘any logical business person would want to do.’ That response provides no explanation of how the Board evaluated evidence to make its decision,” the government said. “Nor has the Board identified the evidence it used in making its determinations or explained how that evidence justified the Board’s decisions. The Board’s failure to describe a standard bled into the Board’s challenges to each law, which relied on legal conjecture -- not the reasoned evaluation of evidence that arbitrary and capricious review requires.”

The laws the government is trying to validate include Act 176 of 2019, Act 138 of 2019, Act 82 of 2019 and Act 47 of 2020.

In late 2019, the government enacted Act 176 to provide all eligible public employees with the right to accumulate vacation and sick leave at the rates of 2.5 and 1.5 days per month, respectively. To ensure Act 176 would not affect the government’s payment obligations to employees or overall productivity, the Legislature retained existing caps on vacation and sick days and the requirement that each agency develop a plan to ensure paid days off do not disrupt government services. Act 176 does not require the government to expend any funds, nor does it reduce revenue; the law is fiscally neutral, the government said. On Dec. 26, 2019, the government submitted a certification estimating that Act 176 would have “no impact on expenditures” or “revenues,” and concluded that Act 176 is “not significantly inconsistent” with the 2019 Fiscal Plan. The oversight board was silent on Act 176 for almost five months, the government said, but then rejected the certification as inadequate because it “was not accompanied by the estimate required under the law.”

On Aug. 1, 2019, then-Gov. Ricardo Rosselló Nevares signed into law Act 138, which amended Puerto Rico’s Insurance Code to prohibit health insurance companies from arbitrarily denying provider-enrollment applications from qualifying healthcare professionals and healthcare organizations in Puerto Rico. The government concluded that health insurance companies had been improperly denying enrollment applications from Puerto Rico’s doctors, hospitals, laboratories, pharmacies, and similar healthcare service providers -- causing medical professionals to leave the island. On Sept. 12, 2019, the government submitted the Act 138 certification to the oversight board. More than two months later, on Nov. 15, 2019, the board rejected the certification for “fail[ing] to provide the formal estimate of the fiscal impact as required under” PROMESA Section 204.

Act 82 established the “Office of the Regulatory Commissioner of the Administrators of Benefits and Pharmacy Services” within the Department of Health to regulate pharmacy benefit managers (PBMs) and pharmacy benefit administrators (PBAs) -- middlemen in the healthcare industry that negotiate medication costs between pharmaceutical companies and third-party payers. Before Act 82, PBMs and PBAs were unregulated in Puerto Rico, causing market inefficiencies, lack of transparency, and inflated prescription drug prices, the government said. Act 82 prohibits PBMs and PBAs from engaging in anticompetitive and deceptive practices that harm consumers, health insurance plans, and pharmacies in Puerto Rico, as well as the government. The Act 82 certification, submitted on Nov. 18, 2019, specified that Act 82 would have an “approximate impact of $475,131.47 on the Department of Health’s budget,” which would be “implemented using budgeted resources” already certified by the oversight board. On Dec. 18, 2019 the board rejected the Act 82 certification, contending that its “estimate is not ‘formal’ and not accurate because it provides only an ‘approximate impact’ on the Department of Health’s budget.”

As part of the government’s coordinated effort with the oversight board to address the COVID-19 pandemic, the island Legislature passed Act 47 to provide tax relief to health professionals, whose personal and professional sacrifices have been integral to protecting Puerto Ricans’ health, safety and welfare, the government said. In April 2020, before Act 47’s passage, the oversight board’s municipal affairs & legislative review director assured the governor’s legislative affairs adviser that the board had “no issue” with Act 47. Then-Gov.

Wanda Vázquez Garced signed Act 47 into law on April 28, 2020. On May 4, 2020, the government submitted the Act 47 certification to the board. On May 21, 2020, despite the oversight board’s earlier assurance that it “had no issue” with Act 47, the board rejected the Act 47 certification because it “failed to provide the formal estimate of the impact Act 47 will have on expenditures and revenues” and because Act 47 “will reduce revenue by tens of millions of dollars per year, without any corresponding cut in spending or proposal to increase revenues from other sources.”

According to the government, the reason for the rejection of the four laws was speculative.

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