Health care reform: AT&T seeks profit by denying benefits

The front of AT&T headquarters on a cloudy day

The health care reform bill has inspired an AT&T strategy that involves increasing its profits by billions of dollars via denying employees health insurance. Flickr photo.

Health care reform is inspiring corporations to dream up creative strategies that avoid the obligations required by the health care reform bill. A cold-hearted genius at AT&T may have found the ultimate way to make health care reform backfire on the law’s best intentions of eventual universal coverage. The new health care law requires companies to pay a penalty for denying employees health care. It may turn out that paying the government penalty costs far less than providing coverage.

Corporate health care reform maneuvers

The quest for universal coverage spawned the idea to drop health care benefits. Fortune reports that we know this because of other cynical corporate maneuvers over health care reform. When President Obama signed the health care bill, AT&T and Verizon made headlines announcing hits on their projected earnings of about $1 billion. Why? The health care bill ends tax deduction for the federal retiree drug-benefit subsidy. For corporations, this subsidy was an instant cash loan they didn’t have to pay back. The government gave them money they didn’t earn to pay for retiree drug benefits, which they were allowed to deduct from their taxable earnings.

The announcements by AT&T and Verizon that health care reform would cost them billions of dollars infuriated Congressman Henry Waxman. He accussed them of grandstanding to exaggerate the cost of health care reform on employers. As chairman of the House Energy and Commerce Committee, he ordered them to turn over documents related to how they were dealing with health care costs.

Health care bill: unintended consequences

The unintended consequences of the health care bill are starkly outlined in the documents. Fortune reports that an AT&T PowerPoint slide entitled “Medical Cost Versus No Coverage Penalty” shows that 2009 medical costs were $4.7 billion. The federal penalty for denying coverage is $2,000 per employee. With 283,000 employees, AT&T would be penalized $600 million. By denying its employees health care, AT&T could possibly increase its profits by $4.1 billion.

Health insurance companies slither

After the health care reform bill passed, health insurance companies joined AT&T and Verizon in trying to weasel out of the law. It didn’t take long for Big Insurance to look for loopholes in the health care reform law. Starting Sept. 23, the health care bill will ban health insurance companies from denying coverage to children with pre-existing conditions. The New York Times reported on March 29 that insurance lawyers are claiming the bill’s “fine print” allows them to refuse to cover children with pre-existing conditions such as asthma, diabetes, orthopedic problems, birth defects and other illnesses.The insurance companies said the law only requires coverage for pre-existing conditions if a policy is sold–it doesn’t require the insurance companies to allow access to a policy. Riiiiiight.

Health insurance: profits or policies

Can companies be so cold-hearted to actually deny benefits because of health care reform? Fortune reports that companies say certain aspects of the health care reform bill will increase the cost of providing health insurance. Parents will be able to keep children on their plans until they are 26 years old, a benefit they say will cost millions of dollars a year. They also say they won’t be able to pass the full amount of a tax on “Cadillac insurance plans” on to their employees.

If companies like AT&T and Verizon can rake in billions of dollars in profits by not providing health care coverage, you can bet they will follow the money.

Other recent posts by bryanh