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Health Care Law Encourages Elimination of Worker Benefits

May 06, 2010 is reporting more bad news for American workers as a result of the Democrats’ new health care law. After reviewing internal company documents, Fortune reports that four major U.S. employers (AT&T, Verizon, Deere and Caterpillar) are considering “dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.”  These companies currently offer health benefits to well over 2.3 million employees, retirees and their dependents — a figure which exceeds the population of 15 states as well as the District of Columbia. correctly points out that this “would dismantle the employer-based system” and “would seem to contradict President Obama’s statements that Americans who like their current plans could keep them.” 

While the news is certainly disturbing, it should not be shocking.  Republicans and non-partisan experts have predicted for months millions of employees will lose their health insurance as a result of the new law. 

How can this be true?  As points out, because of the way the Democrats wrote the health law, it is much cheaper for many employers to pay the tax penalty than it is to offer health insurance to their employees.  For example:

  • An AT&T report [see slide 6] notes that they spent $4.7 billion on medical costs but would have been taxed a much lower amount ($600 million) for not offering their 1.2 million employees, retirees, and their dependents’ health care benefits  – a savings of $4.1 billion for the company.  
  • estimates Caterpillar could reduce its expenses by 70% if they eliminate health benefits and instead pay the tax.