Will it help or hurt businesses? Part 2

Businesses are going to see a lot of changes with the health care legislation. Many businesses have come out and said that this bill will cost $100 million over 10 years or 1 billion this year (at&t). What in this bill is costing them money?

Here are a few of the provisions: It introduces a penalty of $2,000 per employee that does not get subsidized health benefits. This applies to companies with more than 50 employees and does include some part-time employees. It also places a penalty if employees are stuck paying more than 9.5% of their income on health insurance. Businesses will also lose tax savings for retiree prescription drug plans. This is a series concern for companies like GM who have a lot of retirees covered under such plans. The penalties do go into effect for a few years but the tax changes go into effect in 2011.

There are a few provisions that will save businesses money. Small businesses can band together in the insurance exchanges to be into larger pools. The idea is that being in a larger pool will save money. According to the CBO, costs will increase for these pools over the next six years. It is possible for these costs to eventually go down. The CBO does not say one way or another.

What Companies are Saying

AT&T has set aside $1 billion dollars to pay for the changes. They say that the biggest cost will be the added cost to retiree health plans. They are considering reductions in coverage for their retirees.

John Deere expects a cost of $150 million a year, Caterpillar expects $100 million. Verizon is expecting a $970 million dollar hit. I could list more companies, but I think you get the idea. All of the companies mention the lose of tax breaks for retiree health plans.

It should be noted that this change in taxes does not in any way change the way that health care is delivered. The government is indirectly raising the cost of health care for retirees. There are several possible outcomes for this situation. I'll list a few and you can decide which you think are most probable.

1) Businesses will foot the bill for the extra taxes with no effect on retiree health plans.

2) Businesses will pass the costs onto retirees, who will have greatly reduced benefits.

3) Businesses will pass the costs onto consumers, raising prices for goods, but not affecting retiree plans.

4) In the near future significant improvements will be made in the method of delivering health care. Businesses will pay more for a few years but will reap significant savings in the years to come.

The Conclusion

The white house and President Obama say that this bill will save businesses a lot of money. The Business Rountable says that it could save them a lot of money, if well executed. If poorly executed, it will cost them a lot of money. The CBO and many businesses say that it will end up costing a lot of money.