Washington Republicans Contemplate Major Benefit Reforms

While Republicans in the Senate and House have faced real difficulty in passing ambitious health care reform measures, experts convened for Mercer’s mid-year Washington update presentation warned attendees “never to turn their back on a zombie.”

The expression captures the unpredictable way the House and Senate have operated so far under the Trump administration—pledging major changes to signature Obama-era policies but so far delivering very little that is substantive.

Mercer experts explained how Senate majority leadership has postponed their first vote on repeal and replacement of the Affordable Care Act (ACA), in the wake of a hard-fought but eventually successful effort to pass similar legislation in the House. So far the Senate version of the bill has not been able to generate enough support to make passage seem likely—and it probably won’t help matters to have the House and Senate bills “twisting in the wind” over the July 4 recess. That is something Republicans wanted to avoid, the Mercer experts all agreed, as the break from debate will almost certainly lead to a loss in momentum and a lot of uncomfortable meetings and town halls with angry constituents.

Mercer experts speculated that the Medicaid-focused changes in the House and Senate bills are a big part of what has stalled the debate. Moderate Republicans are more interested in protecting the generosity of Medicaid within their constituent populations, while the conservative wing of the party wants to see big cuts. Middle ground may not seem likely here, Mercer warns, but it could materialize depending on what other parts of the legislation could be reworked. The bottom line right now is that there is a lot of drama left ahead before employers will see either repeal/replacement of the ACA, or if it will in fact be left intact.

The picture on retirement-related tax reform is just as complicated and controversial, Mercer experts agreed. The consensus was that, if the White House and Congress want to keep their campaign promise of enacting tax reforms this year, they will really need to pick up the pace. So far the employee benefits industry has seen “only talk of broad goals that focus on lowering rates at a very general level—nothing very substantial yet.” The Mercer experts say they have been told that a lot of negotiation is going on behind the scenes in this area, “very much including proposals to change the way retirement plans are taxed.”

Some members of leadership have pledged to leave retirement plans alone, one speaker noted, but it remains to be seen how that will actually play out. Very prevalent are the “Rothification” proposals, which Mercer finds “concerning in terms of diminishing the incentive for savings that employees have right now. The potential impact here for employers is huge, Mercer warns, but the tax issues are probably going to have to wait until after the score is settled on health care reform.