As the dust begins to start (thats right, I did say begins to start…) settling on the practical implications of health reform, we’ve seen the first big batch of employers announcing the immediate financial impact. The chart below captures the magnitude of earnings related announcements we’ve seen over the past week or so:
Click on Chart to Enlarge
More info on the announcements here and here.
In each of these situations, the bulk of the adverse affect comes from the loss in deductibility of the Retiree Drug Subsidy (RDS) program associated with Medicare D coverage provided by these companies. RDS provides a federal subsidy worth 28% of the cost of prescriptions paid by companies on behalf of Medicare beneficiaries enrolled in Medicare D “creditable coverage” plans. By and large, these chareges reflect the fact that beginning in 2013, the tax fee status of these subsidies is eroded as the underlying expense is no longer deductible.
CEO’s from these companies have been called to testify in front of Henry Waxman’s (D-CA) Energy and Commerce Committee on April 21. Pay close attention to the outcome of these hearings. Although Waxman’s intention is clearly to challenge and discredit the announcements, the testimony could shift public focus more directly onto the jobs impact of the reforms, and any lasting momentum in that direction could have a big impact on the political forces fighting the new law.
Thanks! I’m trying hard to understand the impact of HCR and this is the best web-site I’ve found so far with clear explainations. I appreciate it! Please keep it up.