This isn’t getting a lot of play a ton of MSM attention as of yet, but it should:
The great mystery surrounding the historic health care bill is how the corporations that provide coverage for most Americans — coverage they know and prize — will react to the new law’s radically different regime of subsidies, penalties, and taxes. Now, we’re getting a remarkable inside look at the options AT&T, Deere, and other big companies are weighing to deal with the new legislation.Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill’s critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government…
In a statement to Fortune, Verizon said it is not, “considering or even contemplating” the plans laid out in the report, though records show the company did send the report to its board shortly after the reform plan was passed by Congress…
Caterpillar and AT&T actually spell out the cost differences: Caterpillar did its estimate in November, when the most likely legislation would have imposed an 8% payroll tax on companies that do not provide coverage. Even with that immense penalty, Caterpillar stated that it could shave $25 million a year, or almost 10% from its bill. Now, because the $2,000 is far lower than 8%, it could reduce its bill by over 70%, by Fortune’s estimate. Caterpillar did not respond to a request for comment.
AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead. AT&T declined comment.
The gist of this piece is that companies are weighing the economics of paying for health care under the ACA versus dropping coverage and paying the employer penalty. For some, paying the penalty is less than paying for health care.
I’m of two minds about this. The first is sort of an “I told you so.” If you don’t want to have an all-inclusive system (like single payer), then you need to find another way to make sure everyone participates. The whole point of the mandates and penalties is to make sure that people and companies don’t opt out of the system. But, such mandates and penalties are unpopular. Therefore, Congress kept watering them down to make them more palatable. The result is what you see – it may be economically advantageous not to pay for insurance. The fact that companies are considering this should not be unexpected; nevertheless it’s not a good development. If companies decide to drop coverage it will make people unhappy and might make the bill cost more than it otherwise would have.
On the other hand, I wouldn’t make too much of this. While the penalty that tries to force companies to provide health insurance is less than it possibly should be, it’s more than what exists today (which is zero). You see, there is nothing today that forces companies to provide insurance at all. They do it because that’s how they stay competitive as employers; it’s part of the compensation package. Companies that drop coverage, today or in the future, will be much less attractive to employees, and that could result in a loss of talent at those companies. Plus, they will have to pay a penalty. If they aren’t dropping coverage today (when they face no penalty), there’s no reason to assume they will in the future (when there is a penalty). I think this is more of a threat than something that will actually happen.
(UPDATE: Some have pointed out to me the fact that a number of conservative blogs have picked up on this story. So I amended my first statement.)
