Health benefits measures stymied as Republican backers lose power

WASHINGTON—Several Republican-backed benefits measures that were supported by business groups likely are dead as a result of the election of a Democratic majority in both houses of Congress.

In particular, proposals to expand health savings accounts and to exempt trade association health plans from state benefit mandate laws have little chance of becoming law, observers say.

But a Democratic-backed proposal that would be welcomed by some employers-an expansion of Medicare prescription drug benefits-will likely get more congressional attention as a result of the shift in power.

Business groups had hoped that legislators would pass the HSA measure-approved in September by the House Ways and Means Committee-as part of a broader bill during a special congressional session later this month.

That bill, embraced by committee Republicans and strongly opposed by the panel's Democrats, would allow, in certain situations, larger contributions to HSAs and would make it easier for employers to convert a key component of first-generation consumer driven health plans-health reimbursement arrangements-to HSAs.

The measure, though, was strongly opposed by both Rep. Charles Rangel, D-N.Y.-who will succeed HSA supporter Rep. Bill Thomas, R-Calif., as Ways and Means Committee chairman-and Rep. Pete Stark, D-Calif., who will become chairman of the panel's health subcommittee. Rep. Stark described the bill as a billion-dollar tax break for the wealthy, arguing that the money instead should be used to support public health care programs.

With HSA opponents soon to be in leadership positions, benefit experts rate the bill's chances of passage at near-zero in both the short and long term.

"It has gone from unlikely to highly unlikely," said Lew Freeman, president of the Employers Council on Flexible Compensation in Washington.

"What incentives do Democrats have to let the HSA legislation through this year knowing that they might get a better deal next year?" said James Klein, president of the American Benefits Council in Washington.

Indeed, with HSA opponents such as Rep. Rangel chairing congressional committees with jurisdiction over HSA legislation, any proposal to expand HSAs might not even be considered next year at the committee level.

"At the end of the day, who controls the committees also can control the process," said ABC's Mr. Klein.

Still, Mr. Klein isn't ready to rule out HSA expansion legislation in the next congressional session, noting that Democrats may agree to certain HSA-related changes in exchange for Republican support for raising the minimum wage, he said.

On the other hand, a Republican-backed proposal to exempt health insurance plans offered by trade associations from state benefit requirements-an effort that several times has been approved by the House only to later fail in the Senate-now seems unlikely to receive serious consideration.

Noting that association health plan proposals failed to win final approval when the GOP controlled Congress, an AHP measure "likely wouldn't even make it out of committee" next year, said Frank McArdle, a consultant in the Washington office of Hewitt Associates Inc.

But another health care-related proposal-expanding the prescription drug benefit offered under the Medicare program-will be made a higher priority, some say.

"The Democrats would like to fill the doughnut hole," Mr. McArdle said, referring to the structure of the standard Medicare prescription drug benefit in which there is no coverage for expenses that fall within a certain layer.

If such a proposal were enacted, it could be a boon to those employers with retiree prescription drug benefit plans that supplement benefits provided by Medicare Part D. With Part D providing a greater chunk of coverage, the burden on employers would be lessened.

On the pension side, Democratic control of the House will mean a dramatic shift in who controls a congressional committee that has jurisdiction over pension issues. The new chairman of the House Education and Workforce Committee will be Rep. George Miller, D-Calif.

Rep. Miller was a vocal opponent of the Pension Protection Act, which Congress passed earlier this year to strengthen pension funding requirements. He charged that, among other things, the law will make pensions less secure and doesn't protect older employees from future benefit cuts if their companies converted their traditional pension plans to cash balance plans.

Congress, though, is unlikely to reopen the PPA, given the amount of time it spent on the issue and the fact that the measure received strong bipartisan support, especially in the Senate, noted Mark Warshawsky, director of retirement research at Watson Wyatt Worldwide in Arlington, Va., and the Treasury Department's former assistant secretary for economic policy.

On the other hand, if legislators decide to reopen the PPA to make certain technical changes, "There is a risk that a lot of mischief could be attempted," said Mark Ugoretz, president of the ERISA Industry Committee in Washington.