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The big business pushback against health reform

By Suzy Khimm

Hi, everyone. I’m Suzy Khimm, and I write about national politics for the Washington bureau of Mother Jones. I was previously at The New Republic, where I helped cover the health-reform debate, and I'm also on Twitter. While Ezra’s on vacation, I’ll be focusing on what health reform means moving forward, both in terms of politics and policy in light of the battles already underway.

Though the Republicans' effort to overturn the Affordable Care Act seems to be losing steam, another kind of repeal movement is just starting to gain momentum. The latest protestations aren’t focused on repealing the entire health law — a proposition that had dim chances of success from the get-go. Rather, certain industry lobbies and interest groups are starting to attack specific parts of the health law that they’d like to see repealed or rolled back. And among the newest critics is an association of large corporations unhappy with a provision that eliminates a special tax break that helped businesses pay for their retiree prescription drug coverage.

What’s the thrust of their objection? Under Medicare Part D, the government gave companies a 28 percent, tax-free subsidy to pay for their retirees’ drug plan, but also let companies deduct the amount from their income taxes. The health law continues the tax-free subsidy but eliminates companies’ ability to deduct it from their taxes in 2013. The changes prompted some companies to draw attention to the charges: AT&T recently reported that the accounting charge would cost them $1 billion, Caterpillar reported $100 million, and other corporate giants have made similar announcements.

White House adviser Valerie Jarrett insists that AT&T, Caterpillar and other companies aren’t part of “an orchestrated effort” to overturn the provision — she says they’re simply following the law by reporting the accounting charge. But the American Benefits Council, which counts AT&T among its 300 members, has made a vocal push for its repeal, calling the measure “a serious mistake that is having negative and unintended consequences” during a time of economic strain.

And the White House itself has begun to hit back more aggressively. In today’s Wall Street Journal, Commerce Secretary Gary Locke defends the health law as “pro-business,” citing the other parts of the law that will be a boon to big companies — by reducing premiums and costs to employers — and dismissing the objections as a one-time charge that’s dwarfed by the larger benefits.

The accounting charge controversy is just the latest sign that lobbying over health reform hasn’t stopped with the passage of the bill. There are measures that, seen in isolation, aren’t necessarily a popular sell, either to specific interest groups or the public at large, making it easy to raise a hue and cry. And I’d expect more and more conservatives to embrace this kind of “selective repeal” as they realize that they can only go so far with a total repeal campaign that even some Republicans have described as more symbolic than realistic.

But the fact is that the Affordable Care Act is meant to work as a whole, and stripping away select provisions stands to upset the balance. The accounting charge, for example, will generate some $4.5 billion to $5 billion in revenue — about the amount that the government is investing in reinsurance programs for early retirees, which will lower premiums as a boon to both employers and employees. These kind of trade-offs are fundamental to making the law work and deliver the kind of benefits that reform advocates have promised. And big businesses themselves have recognized the need for this trade-off as well, despite some of the hits they may take in the process.

It’s the reason the Business Roundtable swung in support of health reform. And it’s why companies such as G.E., Credit Suisse and Morgan Stanley haven’t joined the American Benefits Council’s pushback, shrugging their shoulders at the health law’s accounting charge in light of ways they believe they’ll stand to gain.

-- Suzy Khimm is a journalist who covered health-care reform at The New Republic and is now a political reporter at Mother Jones.


By Washington Post Editors  |  April 1, 2010; 1:25 PM ET
Categories:  Health , Health Coverage , Health Economics , Health Reform  
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Comments

Speaking of the Republicans' stated intention to "Repeal and Replace" the ACA: Harry Reid and Nancy Pelosi should introduce a bill to repeal the ACA and replace it with "Medicare for All". Then make Republicans vote on it. Seeing how Republicans lately have been making themselves out to be the saviors of Medicare combined with their desire to repeal the ACA, how could they possibly vote against a new bill such as this?

Posted by: boredgeorge | April 1, 2010 2:01 PM | Report abuse

Suzy, can you clarify something for me? The Senate bill stated that dependents could stay on their parents' plans "until age 26" but the reconciliation fix says "up to age 27" I believe. Most believe that this means you stay until you turn 27 not until you turn 26.

Posted by: LindaB1 | April 1, 2010 2:20 PM | Report abuse

We can only hope their succesful!

Posted by: obrier2 | April 1, 2010 3:07 PM | Report abuse

You can also pass along some perspective. Case in point Caterpillar.

Estimates are that actual costs would be 7 million a year. That is 0.2% of pre-recession profits and less than 1% of latest profit projections. (see the WSJ straight news article as opposed to the spin of the editorial pages)

The effect on jobs would be minimal, seven million dollars is about 140 union wage jobs. Not that I don't feel for the 140, but this is relative to a workforce of over 90k and only if the company compensates for all of its losses with job cuts.

The subsidy is only about $125 per retiree, yet reform could save between $100 to $200 per employee, therefore the costs would be more than made up through savings. So 7 million in cost versus 9 to 18 million in savings.

Posted by: MassachusettsLiberalinDC | April 1, 2010 5:21 PM | Report abuse

Suzy you say
"the government gave companies a 28 percent, tax-free subsidy to pay for their retirees’ drug plan, but also let companies deduct the amount from their income taxes. The health law continues the tax-free subsidy but eliminates companies’ ability to deduct it from their taxes in 2013."

My question is why not Obama Admin simply justifying this as 'rectification' of earlier loop hole? For too many times I find this Administration and Dems not using simple, straight forward reasoning but resorting to indirect defense. Why? Say here what the matter is - business was getting subsidy and tax credit both and this bill stops that for the benefit of all tax payers. Why that is not good for we all taxpayers (and that vocal gang called Tea Party)?

Just be simple and bat straight.

Posted by: umesh409 | April 1, 2010 5:58 PM | Report abuse

I don't think the Business Roundtable "swung in support" of reform. They still stand by their Sept 2009 report which shows costs out of control. There just isn't much point in lobbying in public against a law that has already passed.

Posted by: bmull | April 1, 2010 6:30 PM | Report abuse

I learned a long time ago that "Reform" basically means that most eveyone will be paying more. I applaud the Whitehouse for finally getting something passed and I hope that some day it will make a difference. Since I left corporate america and became self employed I only continue to pay more for less coverage and a higher deductible. The only real way to afford good health care in this country is to make a lot of money as a business entrepreneur. Learn more at skipthefranchise.com

Posted by: skipthefranchise | April 1, 2010 10:35 PM | Report abuse

It seems like shady accounting by the law to tax companies on a tax credit. Why not just cut the credit? It's the same net effect...except this gives the congress phony revenue to mess around with. Hmmm..I guess that's a good enough reason.

Posted by: staticvars | April 1, 2010 11:59 PM | Report abuse

If the companies want it undone, Liberals should make them say what they want outright, and not allow them to disguise it as some kind of tax issue.

"Oh so you're asking that we give you an additional 28% subsidy?" I'm sure the public will be perfectly amenable to providing additional corporate welfare to our largest corporation.

Posted by: zosima | April 2, 2010 1:12 AM | Report abuse

You should change your name to "Suzy Shill".

In your spirited defense of the Obama "plan", you seem to have left out the fact that the large companies could choose to stop paying the formerly deductible drug benefits ENTIRELY, and dump the retirees on Medicare Part D, leaving the taxpayers to hold the entire flaming bag of trash.

Of course, in ObamaWorld, the taxpayers are a bottomless source of funding.

Let's face it - the government accountants DELIBERATELY didn't consider the scenario where the large companies took their ball and went home. They just needed the phony $4.5 billion to pretend there were going to be savings.

Another tidbit: What about the cost or $2,000 penalty for not providing insurance to seasonal ski workers? The National Ski Resort Association is dying to know (and so are thousands of part-time ski workers)...

Posted by: pwel | April 2, 2010 8:23 AM | Report abuse

This administration wouldn't be having to "hit back" if the new law was something that the voters actually wanted them to pass. Now, after it's passed, at least 50% polled strongly disappove.

So, now the administraion is orchestrating a "Sell Job" *after* it has passed. Government shaping of public opinion to accept their rule.

How is that *NOT* the definition of PROPAGANDA?

Posted by: WrongfulDeath | April 2, 2010 11:17 AM | Report abuse

Thanks for filling in Suzy!

I have followed you on twitter and added you to my health reform list. I have a BLOG I have been keeping on health care. http://pov9.blogspot.com/

I am in this debate as a progressive conservative. I am also a High School cyber teacher of Social Studies.

I agree with a lot of Ezra's logic.

Pat Parris

Posted by: pparris | April 2, 2010 11:17 AM | Report abuse

I agree, this is being portrayed by the right as some ominous plan that just 'might' cost the big corporate people enough money to diminish their huge profits.

These companies are still going to get a TAX FREE 28% subsidy. Now they just won't get to deduct 100% of that tax free subsidy as an expense. Duh! The only thing this law does is correct a loophole that should not have been created in the first place.

Posted by: MaggiePi | April 2, 2010 3:27 PM | Report abuse

The AT&T gambit is pure accounting gobbledygook.

It was announced as a "Charge against..." but it is pure speculation, and anything that it might be charged against would leave numbers hanging that would drive the bookkeepers crazy. For instance, suppose it is a charge against profits. It reduces profits reported by $1 trillion. Assuming AT&T has the $1 trillion there to charge against, at this point AT&T has $1 trillion hanging around with no tag on them. what do the bookkeepers do with that $1 trillion in virtual cash? Invest it? pass it out as dividends? leave it mostly sitting in virtual checking and savings accounts?

As reported, this was a projection of tax reductions not realized over a thirty year period, when they can't even say how much tax deferral they will have next year, (estimated $40 million) until they receive their subsidy and figure out just how much it amounts to. What's more, the subsidy is intended to keep retirees in a corporate sponsered program instead of sending them to Part D Medicare. If the base medical produces the ability to reduce drug costs, say by allowing reimportation, or if in a year or so a more rational, reasonable drug program than Medicare Part D emerges in a bill, there would be no need for the subsidy, so AT&T would lose that, too. It is a wraith with dank locks, stirred by a fitful breeze, standing there at the summons of AT&T to try to scare the voters, but it is pretty much substanceless, and something AT&T's accountants are going to come to despise when they have to juggle it into their ledgers, year after year.

It is just one more tantrum by Conservatives, (in this case a Conservative Corporate Person who gets his Conservative values from the pigheaded values of its board of directors) who aren't willing to admit that they lost a vote when the will of the majority was acceded to by Congress.

Posted by: ceflynline | April 2, 2010 3:37 PM | Report abuse

I'm currently using ATT for my internet(and could be part of a class-action suit for them not providing the speeds they advertise) and for my home phone, and wirelesss and satellite. ATT's of nasty corporate anti-Americanism, really rankles me. It may not be easy to boycott Caterpillar(union-busting GOP shills that they are) but it is surely easy to find a more ethical phone company if need be.

Posted by: wd1214 | April 6, 2010 10:35 PM | Report abuse

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