Tuesday, April 6, 2010

“If you like your health plan, you can keep it." Wait what?

As is documented in the Healthcare Hemorrhage post below, scores of publicly traded companies are being forced to write off billions of dollars against future earnings, eroding shareholder value and costing the equivalent of tens of thousands of jobs. 

But there is perhaps a more onerous result of the impact of Obamacare:  These charges are because companies are losing a tax break for funding retiree's prescription drug coverage.  When Congress passed prescription drug coverage for seniors in 2003, companies that chose to pay for coverage for their retirees were given a tax break.  The favorable tax coverage was an incentive for the companies to keep millions of older Americans out of the less efficient, more costly (to the taxpayer) Medicare coverage.  Obamacare wiped out the tax break.

The Generally Accepted Accounting Principles and SEC regulations forced the companies listed below to announce the effects of the change as soon as the information was known to management.  But what neither these companies nor the Democrats in Congress are likely to tell you is that without this incentive, companies no longer have a reason to fund their retiree's drug coverage.  As a result, millions of retired seniors are going to see their drug coverage plans changed drastically, or ended altogether.  One of three things is going to happen:

1.  The company eats the change in the tax code and continues to fund the plan for existing retirees, but accepts no new enrollments.  In this economic environment?

2.  The company continues to fund the plan for existing and future enrollees, but passes the cost of the tax change on to them in the form of higher deductibles and co-payments.

3.  The company ends the plan altogether and pushes current and future retirees into the Medicare Part D program.

Some combination of the latter two is the most likely, with potentially millions of seniors facing significant cost increases.  They'll either pay for the cost of the tax code change (on the order of about 25 to 30%), or they'll pay the cost of the so-called "donut hole," which is an out-of-pocket cost of prescription drugs under Medicare.

While ObamaCare puports to close the "donut hole," the first year benefit is only $250 and the closure won't be complete until 2014, at the very earliest.

This only serves to highlight and illustrate the lie told by President Obama--repeatedly--throughout the summer and fall of 2009.  He said, over and over again:  "If you like your health plan, you can keep it."  Unless you retired from a company like AT&T, Caterpillar or Prudential, and you enrolled in their retiree prescription drug plans after January, 2004.  

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