Health reform

Firms incur big charges for health law

Nancy Marshall-Genzer Mar 31, 2010
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Health reform

Firms incur big charges for health law

Nancy Marshall-Genzer Mar 31, 2010
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TEXT OF STORY

Kai Ryssdal: Out of Chicago, and the plane maker Boeing today came this: That the company’s going to take a $150 million charge against its earnings this year because of the new health care law.

Boeing’s the latest in a lengthening string of big companies that have made similar announcements this week. They say they are losing millions, in one company’s case a billion dollars, because the health care overhaul ended a tax break they got on drug subsidies for their retirees.

Marketplace’s Nancy Marshall Genzer explains.


NANCY MARSHALL GENZER: Many large companies cover the cost of prescription drugs for their retirees. They get a federal subsidy for that. Until now, they could deduct the subsidy from their taxes. Health care reform keeps the subsidy, but ends the deduction.

ROLAND MCDEVITT: It can be millions and millions of dollars that comes right off their bottom line in 2010.

Roland McDevitt is a health care analyst at the benefits consulting firm Towers Watson. He’s calculated that the loss of the subsidy deduction will cost U.S. companies $14 billion.

Ken Porter is an actuary with the American Benefits Council. He says companies’ ability to borrow money might be affected in the short term.

KEN PORTER: Those companies can’t borrow as much money to operate their businesses as they could have before.

But Roland McDevitt says the health care overhaul could end up saving companies money in the long run. They cover retirees and their families. When more employers are required to offer health care benefits, families will have options.

MCDEVITT: Other family members may be getting coverage through their own employer in the future instead of just stacking up on the one generous employer.

Jerry Katz is a health care analyst with Kurt Solomon. He says businesses will only see benefits from health care reform, after some short-term pain.

JERRY KATZ: That everybody needs to sacrifice including the companies. The only way this happens is if everybody participates in the pain.

Besides Boeing, AT&T, John Deere and Caterpillar have all announced charges to their earnings due to the loss of the subsidy tax deduction.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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