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Thursday, March 25, 2010

As Pelosi said - now we're finding out about what's in the bill

Now that ObamaCare is law, it's time to find out how it is really going to affect American businesses.
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.
But I thought that Obama said that, if we liked our health care coverage wouldn't change.


Rick Caird said...

Yes, the costs to the government of this bill are but a small part of it. The bill is not going to reduce the deficit. These guys pulled out all stops to claim deficit re3duction. They ignored the "Doc fix" and counted it as savings. Does anyone really believe the feds can run a student loan program and save moey over private industry. How did that work out for Fannie and Freddie?

But worse are the costs dumped on policyholders and taxpayers. The increases in Medicaid will bankrupt states and require large tax increases. The costs to policy holders to implement "pre3existing", "no maximum limits, even if you want them". and all the other "brilliant ideas" will significantly increase health care and health care insurance costs. So far, the Democrats have managed t hide these from the voters. But, a time of reckoning is coming.

Tacitus Voltaire said...

increase health care and health care insurance costs

first of all, the legislation will funnel at least $100 billion a year of tax money directly into private health insurance companies. but, in addition to that:

nsurance companies earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest or other income on them until claims are paid out. The Association of British Insurers (gathering 400 insurance companies and 94% of UK insurance services) has almost 20% of the investments in the London Stock Exchange.[6]

In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held.

also, i don't believe the "doc fix" was enacted, IIRC.

now, tell me - given that tons of money will now be pouring into insurance companies, which they will invest and get back even more money from - how will they do anything but thrive?

equitus said...

Try to stay on topic, TV, and stop blowing smoke. Betsy's post is about costs to companies providing benefits to employees and how they belie the promises made by Obama.

The post does not address insurance company profits.

tfhr said...


So this whole health care "reform" thing was about helping the insurance companies "thrive"? Wow. I didn't see that coming especially considering they were made the scape goat in all of this though there are many reasons for high costs.

I do find it odd that you used property and casualty insurance for your model but did not discuss health insurance. I wonder why.

Pat Patterson said...

And then in the real world AT&T, Caterpillar, etc., announced that were taking charges of up to $1 billion because of added health care costs which of course the Democrats claimed would never happen. Oops! And to note the utter futility of such business friendly whoppers this money goes to the IRA not into investments.