Via the Wall Street Journal:
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.
CNBC reports John Deere will be taking an ObamaCare hit as well:
Farm equipment maker Deere expects after-tax expenses to rise by $150 million this year as a result of the health care reform law President Barack Obama signed this week.
Most of the higher expense will come in Deere’s [DE 60.20 -0.29 (-0.48%) ] second quarter, the company said on Thursday. The expense was not included in the company’s earlier 2010 forecast, which called for net income of about $1.3 billion.
Ed Morrissey breaks it down:
Now we have two American-based manufacturers that suddenly have a quarter of a billion dollars less capital than they did on Saturday. That’s just two companies. How much more capital will that grab from American businesses? We’ll start seeing it in their financial disclosures soon enough, and it will run into the tens of billions of dollars, perhaps more.
Some may say, Well, great! It pays for ObamaCare. It also takes the cash that would have fueled expansion, new job creation, and retirement income and sticks it into the hands of government bureaucrats. It will massively bleed the economy at a point in time where we desperately need the private sector to invest in itself and create new jobs and new opportunities.
Instead, those manufacturing jobs will simply go outside the US. If John Deere or Caterpillar doesn’t move them overseas, then foreign manufacturers will take up the slack instead. There would have been no good time for ObamaCare, but this is the absolutely worst time of all to impose these backbreaking taxes on the private sector. Expect unemployment to remain high, and perhaps even go higher, as a result of Congress’ work.
To describe this administration as mind-numbingly clueless is an understatement.
What will be another negative and dangerous side effect from these businesses seeing ballooning costs in their healthcare coverage? Again, back to the WSJ, which hints around at the consequences:
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.
Simply put, the cost of the employer-based healthcare coverage could be too expensive for many employees, so some will either drop or waive coverage from their employer and instead seek to be covered by – you guessed it – a “public option” healthcare plan, a “public option” that could eventually lead to single payer. And does this come as a shock to anyone? Nope, considering that our very own celebrity President said this three years ago:
“As I indicated before, I think that we’re going to have to have some system where people can buy into a larger pool. Right now their pool typically is the employer, but there are other ways of doing it. I would like to — I would hope that we could set up a system that allows those who can go through their employer to access a federal system or a state pool of some sort. But I don’t think we’re going to be able to eliminate employer coverage immediately. There’s going to be potentially some transition process. I can envision a decade out or 15 years out or 20 years out where we’ve got a much more portable system.”
Mission soon to be accomplished?