Inquiry Says Health Care Charges Were Proper
Robert Pear
New York Times
4/26/2010
WASHINGTON — When major companies declared that a provision of the new health care law would hurt earnings, Democrats were skeptical. But after investigating, House Democrats have concluded that the companies were right to tell investors and the government about the expected adverse effects of the law on their financial results.
At issue is a section of the law that eliminates a tax break available to companies that provide drug benefits to retirees as part of their insurance coverage. The tax change, expected to generate $4.5 billion of revenue over the next 10 years, will help offset the cost of providing coverage to the uninsured.
Within days after President Obama signed the law on March 23, companies filed reports with the Securities and Exchange Commission, saying the tax change would have a material adverse effect on their earnings.
The White House suggested that companies were exaggerating the effects of the tax change. The commerce secretary, Gary F. Locke, said the companies were being “premature and irresponsible” in taking such write-downs.
…The documents — hundreds of pages of e-mail messages and financial worksheets — include large amounts of data that substantiate the companies’ concerns. They have reignited a battle over the law in Congress.
Representative Joe L. Barton of Texas, the senior Republican on the House Energy and Commerce Committee, said, “From a financial standpoint, from a purely economic standpoint, many companies would be better off discontinuing health care as a fringe benefit, paying the penalty and pocketing the savings.”…
…Verizon said it was taking a $970 million charge against earnings because of the change in tax treatment of a subsidy it receives for retiree drug coverage. In addition, Verizon said it could be affected by a new tax on high-cost health plans that takes effect in 2018.
“Many of the plans that Verizon offers to employees and retirees are projected to have costs above the thresholds in the legislation and will be subject to the 40 percent excise tax,” the company told employees.
In a general analysis of the new law, Verizon said, “To avoid additional costs and regulations, employers may consider exiting the employer health market and send employees” to state-run insurance exchanges, where people can buy insurance….
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