Companies are already warning about higher health care costs

[Nevermind]

Change you can believe in.

http://online.wsj.com/article/SB1000142 ... ns_opinion


Democrats dragged themselves over the health-care finish line in part by repeating that voters would like the plan once it passed. Let's see what they think when they learn their insurance costs will jump right away.

Even before President Obama signed the bill on Tuesday, Caterpillar said it would cost the company at least $100 million more in the first year alone. Medical device maker Medtronic warned that new taxes on its products could force it to lay off a thousand workers. Now Verizon joins the roll of businesses staring at adverse consequences.

In an email titled "President Obama Signs Health Care Legislation" sent to all employees Tuesday night, the telecom giant warned that "we expect that Verizon's costs will increase in the short term." While executive vice president for human resources Marc Reed wrote that "it is difficult at this point to gauge the precise impact of this legislation," and that ObamaCare does reflect some of the company's policy priorities, the message to workers was clear: Expect changes for the worse to your health benefits as the direct result of this bill, and maybe as soon as this year.

Mr. Reed specifically cited a change in the tax treatment of retiree health benefits. When Congress created the Medicare prescription drug benefit in 2003, it included a modest tax subsidy to encourage employers to keep drug plans for retirees, rather than dumping them on the government. The Employee Benefit Research Institute says this exclusion—equal to 28% of the cost of a drug plan—will run taxpayers $665 per person next year, while the same Medicare coverage would cost $1,209.

In a $5.4 billion revenue grab, Democrats decided that this $665 fillip should be subject to the ordinary corporate income tax of 35%. Most consulting firms and independent analysts say the higher costs will induce some companies to drop drug coverage, which could affect about five million retirees and 3,500 businesses. Verizon and other large corporations warned about this outcome.

U.S. accounting laws also require businesses to immediately restate their earnings in light of the higher tax burden on their long-term retiree health liabilities. This will have a big effect on their 2010 earnings.

While the drug tax subsidy is for retirees, companies consider their benefit costs as a total package. The new bill might cause some to drop retiree coverage altogether. Others may be bound by labor contracts to retirees, but then they will find other ways to cut costs. This means raising costs or reducing coverage for other employees. So much for Mr. Obama's claim that if you like your coverage, you can keep it—even at Fortune 500 companies.

In its employee note, Verizon also warned about the 40% tax on high-end health plans, though that won't take effect until 2018. "Many of the plans that Verizon offers to employees and retirees are projected to have costs above the threshold in the legislation and will be subject to the 40 percent excise tax." These costs will start to show up soon, and, as we repeatedly argued, the tax is unlikely to drive down costs. The tax burden will simply be spread to all workers—the result of the White House's too-clever decision to tax insurers, rather than individuals.

A Verizon spokesman said the company is merely addressing employee questions about ObamaCare, not making a political statement. But these and many other changes were enabled by the support of the Business Roundtable that counts Verizon as a member. Verizon CEO Ivan Seidenberg's health-reform ideas are 180 degrees from Mr. Obama's, but Verizon's shareholders and 900,000 employees and retirees will still pay the price.

Businesses around the country are making the same calculations as Verizon and no doubt sending out similar messages. It's only a small measure of the destruction that will be churned out by the rewrite of health, tax, labor and welfare laws that is ObamaCare, and only the vanguard of much worse to come.

[Ugmo]

Yeah, that's why the stock market made its biggest gains this week in several months - led by..... Caterpillar!

[diablomozart]

so in another thread you're saying "evil corporations make the rich richer"...and then you applaud when caterpillar (a private corporation owned by rich people) makes gains in the stock market while saying the insurance rates are gonna go up...in turn making them...the rich...even more money?..i can't follow your logic anymore...so i'm just gonna put this out there...the two party system has only bred divisiveness and hardline party followers who think they are right and the other side is wrong regardless...it's pretty obvious why nobody can get along...and until we all learn to do just that, this country will never prosper like it once did...BOTH sides have screwed the citizens of america for their own agendas...and yet people still follow blindly, believing what they hear on the news, the net and other places...taking pride in being a democrat or a republican while bashing anyone who isn't...

the sooner everyone learns to think for themselves, the better off this country will be...d.m.

[Ugmo]

You must be confusing me with someone else. I never called corporations evil. I work for one myself. Nor do I have a problem with rich people. I just don't see why the tax system should be set in such a way that the gap between the super rich and everyone else keeps getting wider.

I don't have a problem with investors making money on the stock market either. I'm pointing out how ludricrous it is for companies to be "warning" about higher health care costs while their stocks go through the roof. Doesn't seem like the health care costs are going to bite into their profits too much if investors reward that news by buying their shares.

And working for a huge multinational conglomerate myself (and regularly translating its news releases and speeches by its executives), I can tell you that big companies never pass up an opportunity to advocate lower taxes for themselves. They're just jockying to improve their position for when laws get changed.

[Ugmo]

...taking pride in being a democrat or a republican while bashing anyone who isn't...

I don't "take pride" in being a Democrat like it's some kind of sports team or something. I just despise the Republican Party. Big difference.

[diablomozart]

a very well thought out and non-political answer...thank you...d.m.

[diablomozart]

i don't care for either party...all they have shown me thru the years i have been alive (born in 69 so i'm old...lol) is that they refuse to work together for the common good of the american people...hence why i called it divisive...d.m.

[Ugmo]

They used to work together a lot more than they do now I think. I hate how party interests supercede public interests for both Democrats and Republicans (although unlike Republicans, the Democrats occasionally try to do the right thing, and not just the politically expedient thing. Not often enough, but occassionally).

[diablomozart]

agreed..d.m.

[SmokingGun]

so in another thread you're saying "evil corporations make the rich richer"...and then you applaud when caterpillar (a private corporation owned by rich people) makes gains in the stock market while saying the insurance rates are gonna go up...in turn making them...the rich...even more money?..i can't follow your logic anymore...so i'm just gonna put this out there...the two party system has only bred divisiveness and hardline party followers who think they are right and the other side is wrong regardless...it's pretty obvious why nobody can get along...and until we all learn to do just that, this country will never prosper like it once did...BOTH sides have screwed the citizens of america for their own agendas...and yet people still follow blindly, believing what they hear on the news, the net and other places...taking pride in being a democrat or a republican while bashing anyone who isn't...

the sooner everyone learns to think for themselves, the better off this country will be...d.m.

Mod parent up.