New Healthcare Bill Could Mark the End of Employer Insurance Coverage

While the White House seemed determined to push through a health care bill that the majority of Americans polled did not want, it seems the effects of this change could reach far into the corporate world and change benefits forever.

A recent article  in CNN Fortune takes a closer look inside such corporate giants as AT&T (News - Alert), Deere and others as they evaluate their own options.

Internal documents accessed by Fortune show large corporations are considering getting rid of the health care coverage they routinely provide workers in exchange for paying penalty fees to the government. Such a move would seem in vast contradiction to Obama's claim that Americans who like their current plans would keep them.

If these large companies opt to go this route, the fees they pay in won't even touch the health care costs that will soar way beyond any predictions. The new health care plan outlines a focused control over deficits, which is largely based on American employers maintaining their position as the backbone of the nation's health care system. Did Obama not see this one coming or did his advisors forget to explore all "what if" scenarios?

Perhaps it is a problem of not looking at the bigger picture from the company's point of view. The new legislation eliminated a company's right to deduct the federal retiree drug-benefit subsidy from their corporate taxes, which in effect reduced projected revenue. The result for companies such as AT&T and Verizon was charges of roughly $1 billion. No corporate bean counter can take that kind of change without examining the bigger picture.

The publicity surrounding the costs to AT&T and Verizon (News - Alert) caused Representative Henry Waxman, chairman of the House Energy and Commerce Committee, to demand that they turn over their confidential memos. He also summoned their top executives for hearings. In addition to the write down issue, Waxman wanted every document the companies created that discussed what the bill would do to their healthcare costs.

As a result of this demand, AT&T, Verizon, Caterpillar and Deere produced a combined 1,100 pages of information. Once the Democrats on the Energy Committee read the documents, the hearings were immediately canceled and the committee instead issued a memo that the write downs were "proper and in accordance with SEC (News - Alert) rules.' Not once in the five-page report did it mention that all four companies are weighing the costs and benefits of dropping their coverage.

As for what each company will face in terms of cost, Verizon's document predicts the "Cadillac Tax" of 40 percent on expensive plans will cost its employees $255 million a year when it starts in 2018 and will only rise rapidly from there. The company may not be able to pass the full tax onto employees, putting an added burden on the company as well.  
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AT&T revealed in the reports that it spends $2.4 billion a year on coverage for its almost 300,000 active employees. This amount would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead.

This is an extremely touchy issue and one that wouldn't have come to such a full force front if the health care bill had not been pushed through the system without taking all possibilities into consideration. We are no longer operating in an economy where there are more jobs than workers and companies must offer substantial benefits packages in order to attract top talent.

Those days may never return and professionals throughout the country are looking at the possibility of no insurance coverage and premiums that could cost substantially more than they are paying right now. If companies do have opt to cut their healthcare coverage, will they subsidize employee paychecks to offset the cost? The affirmative answer is probably as likely as the health care plan staying in the black.  

Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan's articles, please visit her columnist page.

Edited by Marisa Torrieri