Is there a parameter in the API I need to call to force a modern Word doc?
You can merge two word documents to keep formatting but I am afraid currently GroupDocs.Merger Cloud does not support the change of the compatibility mode. However, we have logged a ticket MERGERCLOUD-66 for further investigation and resolution. We will keep you updated about the issue resolution progress within this forum thread.
Meanwhile, we will appreciate it if you please share your input documents and output document with us as a zip file. It will help us in the investigation.