Free Markets, Free People


The BFD – its first week

So, how is ObamaCare being greeted by the real world since it was signed into law Tuesday?  Well, pretty much as expected by those who were paying attention (and that wouldn’t include the unicorns and moon pony crowd).  For instance, employees at Verizon were greeted with a statement by the company explaining its interpretation of the law and what that would mean in terms of future coverage:

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.

You may recall that Caterpillar said that the bill would cost them $100 million more in health care coverage in the first year alone. That ought to make them highly competitive.

Verizon is also being punished for offering retirees health benefits:

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.

Or, instead of discouraging employers from dumping retirees on the government, the new plan encourages it and essentially punishes those who don’t. In fact, you could say that the entire bill encourages companies to dump employee coverage. If they’re of a certain size and don’t offer coverage, they are fined $750 per employee. Compare that to the thousands of dollars in cost for coverage plus the expense of administering an employee health insurance program. If you’re running a company in an economy mired in recession, what is one of the primary things you try to do? Cut costs. You have 50 employees and you’re spending $5,000 each on health insurance or $250,000 plus the cost of administration of the program. You can dump it all and pay a fine of $37,500. What would you do?

Oh, and there’s this little goodie to encourage companies to act quickly:

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.

Of course it will. And that will have a significant impact on the economy and first quarter earnings.

Some companies, however, have an alternate plan:

Consumers Energy, a Michigan gas and electric company with 2.9 million customers, said it will not take a big first-quarter charge because, like most utility companies, it can try to recover the added costs from its customers through rate hikes.

The increased costs are going to be paid by someone – customer, taxpayers – it’s all the same in the end.

And that’s pretty much where the states are right now as well. South Carolina just tallied up its new unfunded mandate:

The expansion represents a 4.4 percent increase in the $20.9 billion the state would have spent on Medicaid during that nine-year period, adding roughly $100 million a year to the state’s costs.

The state is looking at a 1 billion dollar shortfall next year – the unfunded mandate adds $914 million to the shortfall over the next 10 years. Any guess who will end up paying for that?

It should be clear, given the Verizon info that the intent is to move people off employer based insurance and on to something else. I’ve always been a proponent of individual health insurance purchased by families individually in a free and competitive insurance market like we do any other insurance product. It immediately solves the portability problem and it drives cost down. What we’re seeing here is a manipulation of tax code pointed at effectively ending employer insurance programs but with a different aim in mind – single-payer government run insurance.

The intent to again offer legislation to establish an public option, voiced by Harry Reid and House Democrats makes that point rather clearly. Democrats will try to pass that before November – bet on it. Should they succeed, then all the parts would be in place to move in that desired direction. Meanwhile, unsurprisingly the promise of “if you like your plan and if you like your doctor you can keep them” appears to be a hollow one. The law incentivizes drastic changes in plans to avoid costs and taxes and in many cases, it is clearly smarter for a business to dump health care coverage altogether.

As for 95% of us not seeing a dime in new taxes – that too was a load of nonsense as most of us knew. Unless you live in the 57th state where none of this has any impact, the new unfunded mandates promise increased taxes – states, unlike the federal government can’t print money and thus have to either cut spending or increase taxes. Since the increased spending is being mandated, it leaves them little choice, does it?

~McQ

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11 Responses to The BFD – its first week

  • What makes anyone think that the Senate will pass the public option when Democrats couldn’t do that when they had 60 votes in the Senate ?
    On the flip side, do Republicans now have to filibuster every piece of legislation to make sure they don’t become a vehicle for reconciliation ?

  • How is the nation reacting to DeathCare 2010? Let’s look at one poll, Quinnipiac, which last week had The Clown™ at 46% job approval. How is the thug doing after it was rammed through the House? He is at 45% job approval! And how does CNN report this? “Obama gets approval bump on health care passage.”

    That’s why CNN thinks this way – their ratings have been going down for years, but since losing approval is a positive sign, perhaps being third out of three cable channels is a positive sign as well.

  • Off topic but kinda related,
    I was thinking about Obama saying “bring it on” to the people wanting a repeal.

    George Bush said “bring it on” to Sadam and the Taliban. Groups that want to make people slaves of the government.
    Obama said “bring it on” to the people who want to be free of the government.

    It says a lot about what kind of person a man is by who he wants to fight.

  • Not trying to troll with this one, but I keep seeing this mentioned at various sites, and am missing something.

    You have 50 employees and you’re spending $5,000 each on health insurance or $250,000 plus the cost of administration of the program. You can dump it all and pay a fine of $37,500. What would you do?

    Why would the business have not just dumped the healthplan when there was no fine if they wanted to do so? This seems like a great incentive to not start offering insurance (Employees have nothing, fine less than the cost of something), but I don’t see how it does more to encourage dropping a plan than existed when the cost of doing so was $0. What am I missing?

    • Because health care was a benefit offered by employers to lure the best and brightest. Costs, as pointed out in the article are going up thanks to this bill. Now it is being made into a costly administrative nightmare. Why would you “start” to offer health care if it cost you $250,00 to do so and only $37,500 not to?

      • I would not start offering a plan. But you’re talking about a company dumping an existing plan. It’s why there’s more incentive to dump a 250K / yr plan that you already have when the savings went down (fine = less savings) that I didn’t (and don’t) get.

        I can understand the argument if it’s “You were paying 200K, now you’re going to be forced to pay 250K becasue of the new mandates and are going to dump the plan to avoid bankruptcy.” But the fine las little to do with that, it’s about getting back under 200K in cost and your options being restricted to just one.

  • Or, instead of discouraging employers from dumping retirees on the government, the new plan encourages it and essentially punishes those who don’t. In fact, you could say that the entire bill encourages companies to dump employee coverage. If they’re of a certain size and don’t offer coverage, they are fined $750 per employee. Compare that to the thousands of dollars in cost for coverage plus the expense of administering an employee health insurance program. If you’re running a company in an economy mired in recession, what is one of the primary things you try to do? Cut costs. You have 50 employees and you’re spending $5,000 each on health insurance or $250,000 plus the cost of administration of the program. You can dump it all and pay a fine of $37,500. What would you do?

    >>> Not a bug, a feature. It gives Obama more enemies to demonize, more pretext for his power grabs

  • McQSo, how is ObamaCare being greeted by the real world since it was signed into law Tuesday?

    Classic cherry picking: you cite the opinion of greedy corporations who opposed ObamaCare because they are greedy racist teabaggers.  The rest of the world thinks that this is just groovy.  Examples:

    Fidel Castro, revolutionary world leader - “We consider health reform to have been an important battle and a success of his (Obama’s) government.”

    Senator Max Baucus, progressive politician - “Too often, much of late, the last couple three years the mal-distribution of income in America is gone up way too much, the wealthy are getting way, way too wealthy, and the middle income class is left behind. Wages have not kept up with increased income of the highest income in America. This legislation will have the effect of addressing that mal-distribution of income in America.”

    Rev. Al Sharpton, progressive religious leader – “[W]e’d have to say that the American public overwhelmingly voted for socialism when they elected President Obama.”

    Paul Krugman, Nobel Prize-winning economist – “And here we are: Social Security still stands, and health reform — imperfect, compromised, but real — has happened.”

    Keva Rosenberg, unemployed person – “It’s a free society. [giggles] Except there ain’t nothing free, because there’s no guarantees. You know? You’re on your own. [giggles] That’s the law of the jungle [giggles].”

    See?  Lot’s of people are happy.  Who cares if a few greedy corporations lose a little money that rightfully belongs to the government people anyway???