Businesses See Unhealthy Costs

After months of remaining silent for fear of retribution, big businesses are finally weighing in on the crippling impact of the Health Care Reform bill. It may be too little too late, but the corporate outcry underscores how the Obama Administration has grossly misrepresented the legislation's affect on millions of consumers, particularly seniors.

The ripple of business unrest is quickly turning into a tidal wave that threatens to bury any chances the Democrats have for selling the bill's benefits. Ironically, many consumers impacted by the changes will be retirees at some of the nation's biggest companies, including thousands of union workers who thought they would be the primary beneficiaries of Health Care Reform.

It all started innocently last week when John Deere Company said the new law would hike its costs by $150 million. That was followed by an announcement by Caterpillar that it would record a $100 million charge to earnings related to the legislation. That notion was seconded by AK Steel Holding Corp. and 3M Company. Then corporate giants Verizon and AT&T weighed in and the house of cards that was Health Care Reform began to crumble right before our eyes.

Here's what is distressing businesses: the new law will make a government subsidy the companies get for retiree drug coverage taxable in 2011. To may politicians, that may sound harmless, because after all, these huge firms have millions to throw around. But by some estimates, the health care costs may trim as much as $14 billion from U.S. corporate profits. However, the biggest losers will not be the businesses, but the many retirees who depend on their company-paid benefits.

So how come these same businesses were mute during the battle over health care reform? Take AT&T as an example. The company is heavily regulated, particularly at the federal level where the Federal Communications Commission holds sway over a huge amount of the firm's fortunes. If AT&T had assumed a high profile position, attacking the bill as anti-business, would the Obama Administration stood still when Democrats control the FCC? Of course not. The administration would have used its leverage to silence dissent.

Now the reform bill is law and the once silent firms are free to complain all they want. Last week, AT&T announced it would book a $1 billion charge to first quarter earnings. This will be a non-cash expense, meaning the company does not actually have to make a $1 billion outlay. However, because of the charge, the company said it was considering changes to the benefits it offers current and retired employees.

An AT&T spokesperson added, "As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company."

If you don't think this is a big deal, consider this: AT&T carries a liability of $27.8 billion on its balance sheet for post-employment benefit obligations for its current and future retirees. The number includes pension payments, but a healthy chunk of those billions are medical benefits that may soon disappear.

In fact, AT&T sounded a warning in its recently released annual report. "The final outcome of the legislation (health care reform) could cause negative impacts to our results and bring uncertainty to our future costs," the company said in its management's discussion and analysis of financial conditions.

About 58 percent of AT&T's 281,000 employees (as of January 31) are represented by the Communications Workers of America. A spokesperson for the union claimed workers' health benefits were locked in because of labor contracts. But those contracts will be expiring over the next two to three years.

While the union representative claims may be true today, there is little incentive for the company to continue to pay for future benefits that are now taxable. Retirees, many probably members of the same AARP that supported the legislation, will find out soon they were sold down the river by the nation's largest senior citizen lobbying organization.

Yet President Obama continually told a skeptical public that his health care reform bill would not change workers' current coverage. Less than two weeks since the passage of the legislation, this is turning out to be another misrepresentation.

How many more will be exposed in the days and months ahead?