Your Plan in Peril Under Obamacare

Thursday, 13 May 2010 10:02 AM

By Jackie Gingrich Cushman

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Last week, my 8-year-old son beat me in chess. He understands that a move by him leads to a move by me, and so on. He is thinking several moves ahead. His goal is to create a series of moves that inevitably leads to his declaring checkmate.

His strategy worked.

While some have speculated that the goal of the Obama administration is to create a single-payer, government-controlled system, Barack Obama has told Americans that, if they like their coverage at work, they will be able to keep it.

What he has not mentioned is that his new law provides financial incentives to large companies (50 employees and over) to quit offering health coverage to their employees, pay the penalty, and have their employees participate in the insurance exchange.

AT&T calculated their potential annual savings would be $1.8 billion. Last year, it spent $2.4 billion providing its 283,000 employees with health coverage. Under the Obama plan, the penalty for not insuring them would have been $600 million.

How do we know this?

Immediately after the healthcare bill was signed into law on March 10, companies that were negatively affected by the change in tax treatment of the retiree drug subsidy had to reflect the negative impact to their earnings.

Not happy with the news, Rep. Henry Waxman, D-Calif., chairman of the Committee on Energy and Commerce, sent letters on March 26 to AT&T, Caterpillar, Deere, and Verizon citing his concern over the large financial impact.

Last month, the four companies filed documents with the committee assessing the financial impact, and the documents proved revealing.

Included in Verizon's submission is a March 3 document that notes, "To avoid additional cost and regulations, employers may consider exiting the employer health market and send employees to the exchange."

Caterpillar's documents include an HR Policy Association report that states: "In 2014, employers will have the option to consider eliminating group coverage, paying the applicable penalties and having their employees enroll through the exchanges . . . If an employer decides to stop offering coverage to its employees, the employer would pay a penalty of $2,000 per full time employee . . . (F)or large employers, the average annual per employee cost of health care is $7,290."

Hmm. Pay $7,290 or pay a penalty of $2,000. What would you do?

"Turns out ObamaCare means, if you like your health plan, you can lose it," Rep. Joe Barton, R-Texas, ranking minority member of the House Energy and Commerce Committee, told me in an e-mail. "The president didn't have to actually strong-arm companies into dumping their employee health insurance because his bill carried financial incentives to virtually guarantee that result . . . I suppose we can't know for some years how many thousands, hundreds of thousands or even millions of workers will lose their company insurance because of health care reform, but I know that it will be a breach of faith for most of them and a tragedy for some."

Why would companies even consider such a move?

Well, directors of publicly traded companies cannot simply operate as they see fit. They have a fiduciary responsibility to the corporation and the corporation's shareholders. This means that they must do what is best for the corporation and its shareholders in the way they deal with customers, finances, and employees.

Just as in chess, rules must be followed: The bishop can only move diagonally, and the castle can move only in a straight line.

If you can save $1 billion, you have to stop and think. In today's competitive environment, saving money may mean saving a business from bankruptcy or retaining employees.

According to AT&T spokesman Marty Richter, "The information we provided the House Committee does not reflect AT&T's plans but merely reflected the tax and other potential cost impacts to AT&T of the health care legislation. As the new legislation is implemented, we will continue to evaluate, as we do regularly, certain aspects of our health care plans."

If the Democrats did not understand what was in their bill, it makes you question who is writing our laws.

The other option is that they clearly understood what is in the bill, and the long-range implications based on the most likely movements of the other players.

The legislation includes financial incentives for large companies to move employees to insurance exchanges. Understanding the fiduciary requirements of public companies, the administration creates a quandary for them. How might this play out?

If companies follow the financial incentives set up by the Obama plan, people and organizations might be unhappy about being moved to the exchanges. In this scenario, the administration will be all too happy to rush in and fix the problem it created through their legislation — creating a single-payer, government-controlled system.

Checkmate, as my son would say.

© Creators Syndicate Inc.

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