Inauguration Day Signals Likely Deluge of Health, Retirement, Paid Leave Policy Activity
Council’s Analysis Updated to Reflect Democratic Senate Control
January 20, 2021
To: American Benefits Council Members
From: James Klein, American Benefits Council President
Today’s inauguration of President Joe Biden begins a period that will be extraordinarily consequential for employee benefit plans. The COVID-19 pandemic continues to wreak havoc on public health and the economy, suggesting likely far-reaching action right out of the gate.
As we reported in the January 15 Benefits Byte, Biden has already released an official summary of his “American Rescue Plan,” a $1.9 trillion pandemic relief package that proposes subsidies for COBRA continuation health coverage and extended paid leave obligations for employers.
As this effort proceeds through Congress, it is possible that the scope of the relief package could expand further to include other Council priority measures, such as defined benefit pension funding stabilization and/or comprehensive bipartisan retirement policy legislation that already has broad support.
The Council has updated its analyses of the forthcoming employee benefits policy agenda for the new Congress and administration:
Also available to Council members is a recording of our one-hour January 13 webinar, The Latest on the 117th Congress: Strategies and Priorities with Democrats in Control.
As these summaries note, the standard operating procedure for any new presidential administration is to reexamine the regulatory activity of the previous regime. On Day One, Biden is expected to issue a moratorium on recent or pending regulations, although it remains to be seen which regulatory projects will ultimately be pulled back.
The Council’s March 2017 Benefits Blueprint, prepared during the last presidential administration transition, outlines regulatory options (including moratoria, executive orders and the Congressional Review Act). We think you will find it in many ways applicable to the Biden administration and may serve as a useful reference.
As we move forward into a brand-new governmental environment, it is important to acknowledge the political atmosphere and how it will likely influence policymaking. It would be an understatement to note that cross-party relationships are extremely fragile in the wake of disputes over the presidential election results and the attack on the U.S. Capitol. Razor-thin Democratic majorities in the U.S. Senate and House of Representatives will certainly complicate President Biden’s opportunities to move his agenda forward. However, it should theoretically empower moderates in both parties, since their votes will be essential to advance or stop legislation. So the current political alignment in both chambers of Congress could be a formula for further gridlock or an invitation to bipartisan compromises by pragmatists. One thing is certain: although the Democrats’ priorities may be stymied, they will dictate the agenda and that makes all the difference in terms of what is and is not even considered by Congress.
Democrats’ preference would probably be the enactment of legislation according to so-called “regular order,” which would require bipartisan support of at least 60 Senators, to overcome any filibuster by Republican lawmakers. If such bipartisan support is not forthcoming, Democrats likely will seek to enact legislation one of two ways. They could seek to change Senate rules to abolish the filibuster. More likely, they will attach their priorities to the annual budget reconciliation legislation. Such measures require only a simple majority to pass. This was used by Democrats in 2010 to enact significant portions of the Affordable Care Act on a party-line vote and by the Republicans in 2017 to pass the Tax Cuts and Jobs Act – also along strict party lines. However, all provisions of a budget measure must have a federal revenue impact. So that provides some guardrails around what can be enacted through that legislative vehicle.
Don’t Forget the Courts
While Democrats control the legislative and executive branches of government, much of the federal judiciary – including the U.S. Supreme Court – has been populated by jurists with a more conservative perspective. As such, the courts may serve as a brake on Democratic policies.
One forthcoming legal decision in particular is likely to have a profound effect on health care policy. The Supreme Court will render a decision in the coming months in California v. Texas, the latest case challenging the constitutionality of the Affordable Care Act (ACA). Biden campaigned on the principle of building upon the ACA. A potential invalidation of any part of the law will set back that effort.
Don’t Forget the States
One byproduct of congressional gridlock is greater activity by states and municipalities. It will require a tremendous effort by the business community to preempt state law on employee benefit and paid leave matters, but of course this is essential to enable our multi-state members to operate plans consistently. The Council and its State Law Project will continue to address state and local developments and update the National Paid Leave Atlas, a member resource that profiles paid sick leave and family leave at the state and local level.
November 6, 2020
To: American Benefits Council Members
From: James Klein, American Benefits Council President
While the outcome of the election will remain officially unresolved for some time, we want to share with you the American Benefits Council’s analysis of the health and retirement policy agenda we expect to be considered when the new Congress and president are sworn into office:
What's Next? The Post-Election Future of Employee Benefits Policy
These two analyses (one health, one retirement) are based upon the current assumption that there will be a Biden administration, a Democratic U.S. House of Representatives (already confirmed, albeit with a smaller majority) and a Republican-led Senate. The composition of the Senate will be the last piece of the puzzle to be decided with one, and possibly two, run-off elections in Georgia on January 5, 2021. In addition to the comprehensive discussion of the issues contained in the documents we have prepared; I would like to share the following thoughts.
Alternative Outcomes in the Senate
While a GOP-controlled Senate is expected, it is worthwhile to at least consider two other scenarios. In the event of a 50-50 tie, the Democrats would be in control with Kamala Harris becoming the most consequential vice president in recent history because of her responsibility to cast any tie-breaking vote. She would also be the happiest person in Washington, D.C. for two reasons. First, because the need to stay close to the Senate chamber will largely spare her the usual vice-presidential duty of attending funerals of foreign leaders. Second, every time she would cast a vote, her side would win!
It is also possible that while the 117th Congress would begin with a Republican majority, that could change at some point over the next two years. In recent years, a few Senate vacancies have occurred. Senator John McCain (R-AZ) passed away. Senators Al Franken (D-MN) and Johnny Isakson (R-GA) both resigned. In all three instances they were replaced by individuals of the same party, but the laws for filling vacancies differ from state to state. Were the Republicans in control at the start of the upcoming Congress and a vacancy later occurred due to the departure of a Republican senator, in some states a Democratic governor would have the authority to appoint a Democratic successor. In other instances, a special election might result in a Democratic victor. In either case it could change which party controls the Senate. Of course, the same mid-year switch could occur if the Democrats start out in control and one of their members departs the Senate. While the likelihood of any of this occurring may be remote, the possibility it could happen underscores the need to understand the Democrats' agenda even if, initially, it seems that much of it will not advance in a GOP Senate.
“Lame Duck” On the Mend? / Government Shutdown?
Members of Congress will shortly return to Washington for the post-election “lame-duck” session to wrap up matters before the final gavel drops on the 116th Congress. When pre-election signs pointed to a Democratic sweep, the prospects for any substantive action in a lame duck session seemed very remote since the Democrats, especially, would not have much incentive to take action until January when they would be in control of the White House and both houses of Congress. Since it appears that the current party control split will continue next year, there may be a desire to get some things done now while the negative political consequences of doing so are minimal. Funding for federal government operations expires on December 11 and must be extended to avoid a government shutdown. Might the outgoing president be willing to shut down the government again because of a dispute over funding for building a wall along the southern border or due to some other policy objective or political grievance?
Of course, serious worsening of the health and/or economic consequences of the COVID-19 pandemic could apply a great deal of pressure on lawmakers to pass another relief/stimulus measure before the end of the year. In a lame-duck session they might have an easier time doing so without raising offsetting revenue to pay for whatever measure they enact. But considering all the factors at play – most notably continued rancorous challenges to the outcome of the presidential and possibly certain congressional elections – it will be a steep climb for lawmakers to discuss and decide substantive legislation. An additional variable is that even if Republicans and Democrats could come to agreement on a pandemic relief measure that might carry with it other legislative items, will the outgoing president, preoccupied with the post-election aftermath, be more or less inclined to sign a deal? We and many others will continue to strongly advocate for our policy priorities until the 116th Congress adjourns. But while the prospects for action in the lame duck have increased in light of the election, it is still very possible that Congress will simply approve another short-term funding measure to keep the government operating for a few more months and then pack up their offices and head home. Our work on unresolved issues will resume when the 117th Congress convenes in January.
Election Legal Challenges
The airwaves are filled with legal analyses by experts far more steeped in election law than I. I would just repeat what I wrote in my Election Day Memo to Members. Many have speculated that due to the current composition of the U.S. Supreme Court, it will ultimately rule in favor of a Trump challenge to the election results, when the case reaches the high court. I do not see it that way. Both in its 2000 Bush v. Gore decision, and rulings the past couple weeks relating to the current election, the Supreme Court has deferred to states’ authority to run elections as they see fit. It is true that the court will scrutinize rule changes that some states recently made to accommodate mail-in ballots, to determine if those changes were made in accordance with that state’s laws or constitution. But, absent those findings, I believe the justices will be strongly inclined to uphold states’ authority to certify the winner of the election. Note: While all the focus has been on whether legal challenges could affect the outcome of the presidential election, the resolution of those disputes could have an impact on all the other federal, state and local races on the ballot.
Democrats Seriously Underperformed
One of the ironies of this election is that although Biden has received approximately four million more popular votes nationwide than Trump (win or lose in the Electoral College), it did not translate into Democratic success in the congressional races. This year, of the 35 Senate races, Republicans were defending 23 seats and the Democrats defended just 12. So, the Democrats had roughly twice as many opportunities as Republicans to pick up additional seats. The fact that they will have only modestly improved their numbers is a big disappointment for them. In the House, predicted gains for Democrats never materialized and, indeed, when the dust settles their majority will be reduced by about eight seats. As a number of commentators have observed, some of the more progressive messages from the Democratic caucus (and Republican focus on those messages) probably played a role in the defeat of some freshman Democrats from “swing districts” who were running for re-election for the first time.
The COVID-19 Pandemic
Even if a lame duck session of Congress enacts some form of economic relief legislation, much more policymaking will need to be done next year to address both the health and economic consequences of the pandemic. For all the concerns expressed by the Biden campaign and many others regarding the current administration’s handling of the crisis, the new administration will not have a magic wand to address the serious challenges either. This will be Biden’s first and most urgent priority. As was the case last spring, the imperative to address the pandemic may create the legislative opportunity to address several health, retirement, paid leave and other benefit-related matters. Our issues will continue to be significantly in play.
Because Democrats lost seats in the House and Republicans lost seats in the Senate, the ability of both Speaker of the House Nancy Pelosi (D-CA) and Senator Mitch McConnell (R-KY) to control their respective caucuses has been weakened. Two years ago, Pelosi beat back an effort to block her ascent to the speakership by pledging that she would not serve for more than four years. Assuming she is re-elected as Speaker when the new Congress convenes, some members of the House Democratic caucus may be more willing to challenge some of her decisions on the theory that they will not experience long-term consequences for doing so if this is her last stint as Speaker. All of that said, both Pelosi and McConnell have repeatedly proven themselves to be extraordinarily effective both as legislative strategists and in leading their members.
Despite the incoming Biden administration’s desire to move quickly on its legislative agenda, there will be certain natural impediments. One of the tongue-in-cheek political truisms in Washington, D.C. is that “the only thing that ever runs smoothly in this town is the transition of power from one president to the next.” That will not be the case this time and that will set back the new administration’s ability to smoothly take over operations. Of course, Biden’s decades-long Washington experience means he won’t be learning on the job. Nonetheless, it will take time for the new Congress to organize the membership of its various committees. Political appointees for executive branch positions not only need to be vetted, but also confirmed by the Senate. A GOP-controlled Senate will not expedite that process.
There will be enormous pressure both within and upon the Biden administration and congressional Democratic leaders to press forward with a bold Democratic agenda. For most recent administrations, the timeline is two years, not four, to get big things accomplished because they have lost control of one or both houses of Congress in the midterm elections. (In 2022 new congressional districts will be drawn due to the U.S. census results, further clouding the potential makeup of the House two years from now.) The more progressive wing of the Democratic party will push hard on the party platform, even though Republican control of the Senate and a narrow margin in the House means that many of those proposals have no chance of succeeding. The Biden administration and Democratic leaders in Congress will have a substantial challenge to satisfy Democratic lawmakers and voters while not wanting to waste time pursuing initiatives that have little or no chance of becoming law. They will want to score as many legislative achievements as possible and that will likely require more modest policy proposals that will leave members of their party unsatisfied.
The Affordable Care Act
The analysis in the document linked to this memo explains possible directions for the future of the Affordable Care Act (ACA). My principal message is that it will be largely shaped by how the U.S. Supreme Court disposes of the California v. Texas case in which oral arguments will be held November 10. For the third time in a decade the high court is being asked to determine the fate of the law. The court may strike down the law entirely, uphold it entirely or largely affirm the decision of the 5th Circuit Court of Appeals, which found the individual mandate to be unconstitutional but concluded that the entire law is not necessarily thereby invalidated. If the Supreme Court rules the same way, it might make the determination itself as to which portions of the law to uphold or strike down. Alternatively, it might return the case to the federal district court to make that determination. These far-ranging possible outcomes will certainly dictate the kind of legislative and regulatory response that Congress and the executive branch will pursue. Perhaps most intriguing is whether the Court will render its decision quickly, so that the other two branches can know where matters stand and act accordingly or wait to decide the case to let the legislative process unfold first.
Health policy will continue to be a sharply divisive issue. But there are some areas where both parties have an interest in progress and —hope springs eternal —that these measures can make it over the finish line including, perhaps, improvements in the ACA’s insurance Marketplaces in ways that help, rather than hinder, employer-sponsored coverage. All those matters and the implications for employer-sponsored coverage are addressed in greater detail in the analysis linked to this memo. As partisan as health policy is, retirement policy often enjoys a good deal of substantive bipartisanship. The problem with getting retirement policy changes over the finish line is the need to attach such measures to a much larger legislative vehicle, which is typically fraught with controversial provisions that Congress and the White House cannot agree on, and so the legislative vehicle “stalls.” Here again, the summaries linked above describe both the policy and political considerations.
Regulations and State / Local Action
As noted above, there are opportunities to find common cause on a range of policy matters; and Biden has frequently spoken of his track record working with lawmakers across the aisle. But while some bipartisanship is possible, we must reckon with the reality that partisan gridlock will be the dominant theme of the next two years. There are two natural byproducts of federal legislative gridlock: regulatory action and state and local legislative action. We should anticipate considerable levels of both.
Regulatory activity is the way the executive branch advances its policy objectives – within the statutory limitations (and sometimes exceeding them). President Obama did so when faced with a Republican-controlled House. The Trump administration has done so with the Democrats in control of the House. There is every reason to believe the Biden administration, faced with the GOP in control of the Senate, will do the same thing. And because the new administration of a different party will be in charge, it will not only pursue its agenda through regulatory action but will also undertake considerable regulatory action to undo many rules promulgated by the Trump administration. The documents linked to this memo provide extensive analysis of the health and retirement regulatory agendas for the Biden administration — including those initiatives of the current administration that the new administration may possibly continue or expand upon.
State and local lawmakers understandably are frustrated when the federal government fails to address important matters —such as ensuring health coverage, retirement security and paid time off. Over the past several years we have seen accelerated levels of activity in all three arenas. Split party control of Congress is virtually certain to provide more incentive for states and municipalities to take matters into their own hands. The Council has always respected the legitimate interest of state and local policymakers to address the needs of their constituents. But our message has consistently been that for multistate employers like our 220+ major plan sponsor members, uniform federal standards are essential. The Council’s Center on State Initiatives and State Law Project coordinates our efforts to pursue this advocacy and to remind lawmakers at both the federal and state/local level of the value of private market solutions.
Paying for It
I recall the day in 1981 when, as a young legislative aide on Capitol Hill, I watched Congress take the highly controversial step to vote to lift the nation’s debt ceiling to over $1 trillion for the first time in U.S. history. Today the debt stands at $27 trillion. So, it took our country 205 years from the founding of the republic in 1776 to 1981 to accumulate $1 trillion in debt. And in the ensuing 39 years it has been multiplied 27 times. More spending to address the pandemic will be forthcoming in the next weeks or months. At some point the nation will need to pay for all this. (Note: I have been predicting that for about the last 20 years and continue to be wrong.) The tax expenditures for employer-sponsored health and retirement benefits are the two largest in the federal budget —estimated to be $3.1 trillion in lost federal revenue for employer-sponsored health coverage over the next 10 years and $2.1 trillion for employer-sponsored retirement coverage over the same period. While we believe the assumptions underlying those numbers are flawed and have conducted analysis demonstrating what a “bargain” the tax expenditures are for the nation, these are the figures that lawmakers rely upon and there is no disputing that they are large. Biden has pledged to make tax reform a top priority, not only to achieve what he believes is better tax policy but, also, to pay for the many expensive initiatives already undertaken and those yet to come. The tax-favored treatment of employer-sponsored benefits is extremely vulnerable as the new administration and Congress take office.
All of us on the Council staff are privileged to serve you. Please let us know how we can help you from a policy advocacy perspective as well as a compliance and benchmarking one in the extraordinary period for employee benefits that lies ahead in 2021.
If you have not done so already, please sign up for the Council’s November 11 membership webinar where we will examine the forthcoming legislative and regulatory agenda. Register for the November 11 webinar here.
The Council is a public policy organization whose members include over 220 of the world’s largest corporations, as ranked by Fortune and Forbes. Collectively, the Council’s members either directly sponsor or administer health and retirement benefits for virtually all Americans covered by employer-sponsored plans.