Obamacare and the Law of Unintended Consequences

In an article published on May 6 in the online version of Fortune magazine, we get a good look at the manner in which capitalism works.  The article details how several large corporations have responded to the passage of Obamacare by performing analyses of the cost of continuing to pay for health care for employees versus the cost of paying the penalties provided in the Obamacare bill for not providing health care.  We learn that Verizon, AT&T and other large companies performed cost/benefit analyses of the Obamacare provisions and found that they will be able to save significant amounts of money if they simply cut their employees loose and instead pay the penalties:

AT&T revealed that it spends $2.4 billion a year on coverage for its almost 300,000 active employees, a number that would fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead.

Corporations exist to make money for their shareholders.  If you were on the board of directors of AT&T and you learned that you could save $1.8 billion per year by cutting off health care benefits for your employees and instead turn those employees over to the government-run health care "exchanges" that will be created under Obamacare, don't you think you would owe a duty to your shareholders to give the matter serious consideration?  In fact, under the fiduciary responsibility laws that apply to corporate directors, those AT&T directors are probably required by law to consider turning the employees over to the exchanges.  What would be the downside to the company?  Certainly, in the marketplace for employees, AT&T would have to compete for employees with other companies that do not make the switch.  Potential employees might choose a different job over an AT&T job in order to avoid the government-run insurance exchanges.  But the Fortune article explains how a company like AT&T could cut off health care benefits and still compete for employees:

So what happens to the employees who get dropped?

And why didn't these big employers drop employee coverage a long time ago? The Congressional Budget Office, in its crucial cost estimates of the bill, projected that company plans will cover more employees ten years from now than today. The reason the bill doesn't add to the deficit, the CBO states, is that fewer than 25 million Americans will be collecting the subsidies the bill mandates in 2020.

Those subsidies are indeed big: families of four earning between $22,000 and $88,000 would pay between 2% and 9.5% of their incomes on premiums; the federal government would pay the rest. So policies for a family making $66,000 would cost them just $5,300 a year with the government picking up the difference: more than $10,000 by most estimates.

As bean counters know, that's not a bad deal for a company's rank-and-file, and it's a great deal for the companies themselves. In a competitive labor market, the employers that shed their plans will need to give their employees a big raise, and those raises could be higher, even after taxes, than the premiums the employees will pay in the exchanges.

So what does all of this mean for taxpayers?  According to the article, if 50% of the employees who are currently covered by employer-sponsored health care plans are instead turned over to the Obamacare exchanges, the cost to the taxpayers of the subsidies to the insurance exchanges will be $160 billion per year by 2016.  Ouch.  And guess what?  None of these costs show up anywhere in the budget projections for Obamacare.

The ultimate irony from this story is that none of this information would have been made public but for the grandstanding of Congressional Democrats.  After the passage of Obamacare, many large corporations subject to SEC regulation issued earnings restatements, which those companies are required by law to issue when events occur that will cause a significant change in expected earnings.  According to The New York Times, forty companies issued earnings restatements because of Obamacare reflecting total earnings reductions of $3.4 billion.  Congressman Henry Waxman then demanded that AT&T, Verizon, Deere and Caterpillar appear before his Congressional committee and explain themselves.  Rep. Waxman was just certain that the companies were involved in a grand conspiracy to discredit Obamacare.  But after reviewing thousands of pages of documents submitted by the companies, Rep. Waxman changed his tune and cancelled the hearings.  It turns out those earnings restatements were proper after all.  And among all of the pages of documents submitted by the four companies to Congress were those pesky cost/benefit analyses referenced in the Fortune article.  Ah, embarrassment.

And what of all this mess?  The law of unintended consequences will leave taxpayers to pay the bill for the outrageous costs of Obamacare, costs that were concealed and obfuscated in the course of the debate by every Democrat from the President on down.