Tag Archives | health care bill

Verizon, Exelon Are Latest to Record Charge

By JOHN KELL – Wall Street Journal

Verizon Communications Inc. said Thursday it expects to record a one-time noncash charge of $970 million in the first quarter, to account for the anticipated impact of the recently enacted U.S. health-care overhaul.

Recording an Impact

Charges firms are taking to account for the effect of the health bill on retiree drug benefits.

Company $ in millions
AT&T 1,000
Verizon 970
John Deere 150
Boeing 150
Caterpillar 100
Prudential Financial 100
Lockheed Martin 96
3M 85-90
Illinois Tool Works 22
Xcel Energy 17
AK Steel 31
Valero 15-20
Honeywell 13
Goodrich 10
Allegheny Technologies 5

Source: Dow Jones Newswires

The telecommunication company, which disclosed the charge in a Securities and Exchange Commission filing, is the latest company to take a charge to account for increased costs related to changes that will come from the health-care law. Specifically, the overhaul prevents companies from deducting tax-free subsidies it receives from the federal government for providing retirees with prescription-drug benefits.

Last week, rival AT&T Inc. said it planned to take a one-time noncash charge of $1 billion. The charges are more significant for companies with a large retiree base.

In a separate SEC filing Thursday, electric and gas utility Exelon Corp. disclosed it expects to record a noncash charge of about $65 million in the first quarter, also related to the health-care overhaul. Exelon said the reduction of the tax deductions was estimated to increase the company’s total annual income tax expense by about $10 million to $15 million.

The companies are taking the charges now even though changes in the health-care law don’t take effect until 2013. Administration officials have said companies are exaggerating the impact of the loss of the deduction because of their general opposition to the new law.

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Health overhaul to hit corporate profits

Tue Mar 30, 2010 2:42pm EDT

(Reuters) – U.S. companies have started to tally up the financial hit they say they will take as a result of the U.S. healthcare overhaul signed into law last week by President Barack Obama.

The government continues to pay subsidies to large companies, including AT&T Inc, Caterpillar Inc and Deere & Co, to help pay for prescription drug benefits for their large ranks of retirees.

However, the revamped law no longer allows companies to deduct the amount of the subsidies from their taxable income. Corporate America complains that the change amounts to a tax hike, while the White House says it essentially closes a tax loophole.

Not all big companies are warning of trouble. General Electric Co, for example, says it does not expect a “significant material impact” on its first-quarter results.

But a number of large U.S. employers have started detailing the expected hit to their bottom line. The latest warnings came from Prudential Financial Inc, which said on Monday that it would take a $100 million charge in the first quarter, and Allegheny Technologies Inc, which expects a $5 million charge.

The tally so far:

* AT&T said it would record a $1 billion noncash charge for the first quarter and evaluate prospective changes to the healthcare benefits it offers to both active and retired workers, according to a filing with the U.S. Securities and Exchange Commission.

* In a regulatory filing, Caterpillar described the regulatory change as a tax hike. It said accounting standards require the world’s largest maker of earth-moving equipment to book a $100 million after-tax charge to reflect the change during the first quarter.

* Deere, a maker of farm equipment, said it expects to record a $150 million charge, mostly in its current fiscal second quarter. The expense was not included in the company’s earlier 2010 forecast, which called for net income of about $1.3 billion.

* No. 2 life insurer Prudential said it expects a $100 million charge during the first quarter.

* 3M Co, which makes products ranging from Post-It notes to optical films for flat-panel televisions, will record a one-time non-cash charge of up to $90 million, or 12 cents per share. It said its January forecast of 2010 earnings did not include the impact of the healthcare law.

* Diversified U.S. manufacturer Honeywell International Inc in January estimated that healthcare reform would trim its first-quarter earnings by 4 cents to 5 cents per share. A Honeywell spokesman said last week that the company had not updated the earlier cost estimate and would continue to review the legislation.

* AK Steel Holding Corp will record a non-cash charge of about $31 million in the first quarter due to a reduction in the value of its deferred tax asset as a result of a change to the tax treatment of Medicare Part D reimbursements.

* Valero Energy Corp said it expects to take a charge of $15 million to $20 million in the first quarter due to the new healthcare legislation, and said it expects further tax costs to be calculated later.

* Metals processor Allegheny looks for a first-quarter one-time, non-cash charge of about $5 million, or 5 cents per share, due to the new healthcare law.

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Health premiums could rise 17 pct for young adults

CARLA K. JOHNSON (AP)

CHICAGO — Under the health care overhaul, young adults who buy their own insurance will carry a heavier burden of the medical costs of older Americans — a shift expected to raise insurance premiums for young people when the plan takes full effect.

Beginning in 2014, most Americans will be required to buy insurance or pay a tax penalty. That’s when premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press. The analysis did not factor in tax credits to help offset the increase.

The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years.

Consider 24-year-old Nils Higdon. The self-employed percussionist and part-time teacher in Chicago pays $140 each month for health insurance. But he’s healthy and so far hasn’t needed it.

The law relies on Higdon and other young adults to shoulder more of the financial load in new health insurance risk pools. So under the new system, Higdon could expect to pay $300 to $500 a year more. Depending on his income, he might also qualify for tax credits.

At issue is the insurance industry’s practice of charging more for older customers, who are the costliest to insure. The new law restricts how much insurers can raise premium costs based on age alone.

Insurers typically charge six or seven times as much to older customers as to younger ones in states with no restrictions. The new law limits the ratio to 3-to-1, meaning a 50-year-old could be charged only three times as much as a 20-year-old.

The rest will be shouldered by young people in the form of higher premiums.

Higdon wonders how his peers, already scrambling to start careers during a recession, will react to paying more so older people can get cheaper coverage.

“I suppose it all depends on how much more people in my situation, who are already struggling for coverage, are expected to pay,” Higdon says. He’d prefer a single-payer health care system and calls age-based premiums part of the “broken morality” of for-profit health care.

To be sure, there are benefits that balance some of the downsides for young people:

_ In roughly six months, many young adults up to age 26 should be eligible for coverage under their parents’ insurance — if their parents have insurance that provides dependent coverage.

_ Tax credits will be available for individuals making up to four times the federal poverty level, $43,320 for a single person. The credits will vary based on income and premiums costs.

_ Low-income singles without children will be covered for the first time by Medicaid, which some estimate will insure 9 million more young adults.

But on average, people younger than 35 who are buying their own insurance on the individual market would pay $42 a month more, according to an analysis by Rand Health, a research division of the nonpartisan Rand Corp.

The analysis, conducted for The Associated Press, examined the effect of the law’s limits on age-based pricing, not other ways the legislation might affect premiums, said Elizabeth McGlynn of Rand Health.

Jim O’Connor, an actuary with the independent consulting firm Milliman Inc., came up with similar estimates of 10 to 30 percent increases for young males, averaging about 15 percent.

“Young males will be hit the hardest,” O’Connor says, because they have lower health care costs than young females and older people who go to doctors more often and use more medical services.

Predicting exactly how much any individual’s insurance premium would rise or fall is impossible, experts say, because so much is changing at once. But it is possible to isolate the effect of the law’s limits on age-based pricing.

Some groups predict even higher increases in premiums for younger individuals — as much as 50 percent, says Landon Gibbs of ShoutAmerica, a Tennessee-based nonprofit aimed at mobilizing young people on health care issues, particularly rising costs.

Gibbs, 27, a former White House aide under President George W. Bush, founded the bipartisan group with former hospital chain executive Clayton McWhorter, now chairman of a private equity firm. McWhorter finances the organization. The group did not oppose health care reform, but stressed issues like how health care inflation threatens the future of Medicare.

“We don’t want to make this a generational war, but we want to make sure young adults are informed,” Gibbs says.

Young people who supported Barack Obama in 2008 may come to resent how health care reform will affect them, Gibbs and others say. Recent polls show support among young voters eroding since they helped elect Obama president.

Jim Schreiber, 24, was once an Obama supporter but now isn’t so sure. The Chicagoan works in a law firm and has his own tea importing business.

He pays $120 a month for health insurance, “probably pure profit for my insurance company,” he says. Without a powerhouse lobbying group, like AARP for older adults, young adults’ voices have been muted, he says. He’s been discouraged by the health care debate.

“It has made me disillusioned with the Democrats,” he said.

Ari Matusiak, 33, a Georgetown University law student, founded Young Invincibles with other Obama campaign volunteers to rally youth support for health care overhaul.

Age rating fails as a wedge issue because the pluses of the new law outweigh the minuses for young adults, Matusiak says.

“And we’re not going to be 26, 27, 33 forever,” Matusiak says. “Guess what? We’re going to be in a different demographic soon enough.”

Nationally representative surveys for the Kaiser Family Foundation have consistently found that young adults are more likely than senior citizens to say they would be willing to pay more so that more Americans could be insured. But whether that generosity will endure isn’t clear.

“The government approach of — we’ll just make someone get health care and pay for someone else — definitely NOT what I want,” says Melissa Kaupke, 28, who is uninsured and works from her Nashville home.

In Chicago, Higdon says he supports the principles of the health care overhaul, even if it means he will pay more as a young man to smooth out premium costs for everyone.

“Hopefully I’ll be old someday, barring some catastrophic event. And the likelihood of me being old is less if I don’t have a good health plan.”

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Consumers Guide To Health Reform

By Phil Galewitz

KHN Staff Writer

Mar 26, 2010

The health-insurance overhaul package signed into law by President Obama is the most far-reaching health legislation since the creation of the Medicare and Medicaid programs.

The following is a look at the impact of the law, which will extend insurance coverage to 32 million additional Americans by 2019, but which will also have an effect on almost every citizen.

Here’s how you might be affected:

Q: I don’t have health insurance. Will I have to get it, and what happens if I don’t?

A: Under the legislation, most Americans will have to have insurance by 2014 or pay a penalty. The penalty would start at $95, or up to 1 percent of income, whichever is greater, and rise to $695, or 2.5 percent of income, by 2016. This is an individual limit; families have a limit of $2,085. Some people can be exempted from the insurance requirement, called an individual mandate, because of financial hardship or religious beliefs or if they are American Indians, for example.

Q: I want health insurance, but I can’t afford it. What do I do?

A: Depending on your income, you might be eligible for Medicaid, the state-federal program for the poor and disabled, which will be expanded sharply beginning in 2014. Low-income adults, including those without children, will be eligible, as long as their incomes didn’t exceed 133 percent of the federal poverty level, or $14,404 for individuals and $29,326 for a family of four, according to current poverty guidelines.

Q: What if I make too much for Medicaid but still can’t afford coverage?

A: You might be eligible for government subsidies to help you pay for private insurance that would be sold in the new state-based insurance marketplaces, called exchanges, slated to begin operation in 2014.

Premium subsidies will be available for individuals and families with incomes between 133 percent and 400 percent of the poverty level, or $14,404 to $43,320 for individuals and $29,326 to $88,200 for a family of four.

The subsidies will be on a sliding scale. For example, a family of four earning 150 percent of the poverty level, or $33,075 a year, will have to pay 4 percent of its income, or $1,323, on premiums. A family with income of 400 percent of the poverty level will have to pay 9.5 percent, or $8,379.

In addition, if your income is below 400 percent of the poverty level, your out-of-pocket health expenses will be limited.

Q: How will the legislation affect the kind of insurance I can buy? Will it make it easier for me to get coverage, even if I have health problems?

A: If you have a medical condition, the law will make it easier for you to get coverage; insurers will be barred from rejecting applicants based on health status once the exchanges are operating in 2014.

In the meantime, the law will create a temporary high-risk insurance pool for people with medical problems who have been rejected by insurers and have been uninsured at least six months. This will occur this year.

And starting later this year, insurers can no longer exclude coverage for specific medical problems for children with pre-existing conditions, nor can they any longer set lifetime coverage limits for adults and kids.  The Obama administration insists that the law also would bar insurers this year from turning away children with pre-existing conditions. But some insurers and children’s advocates say the law isn’t clear on that point, and the administration has said it will draft clarifying regulations.

In 2014, annual limits on coverage will be banned.

New policies sold on the exchanges will be required to cover a range of benefits, including hospitalizations, doctor visits, prescription drugs, maternity care and certain preventive tests.

Q: How will the legislation affect young adults?

A: If you’re an unmarried adult younger than 26, you can stay on your parent’s insurance coverage as long as you are not offered health coverage at work. This benefit will begin later this year, but will require regulations clearly spelling out eligibility criteria.

In addition, people in their 20s will be given the option of buying a “catastrophic” plan that will have lower premiums. The coverage will largely only kick in after the individual has $6,000 in out-of-pocket expenses.

Q: I own a small business. Will I have to buy insurance for my workers? What help can I get?

A: It depends on the size of your firm. Companies with fewer than 50 workers won’t face any penalties if they don’t didn’t offer insurance.

Companies can get tax credits to help buy insurance if they have 25 or fewer employees and a workforce with an average wage of up to $50,000. Tax credits of up to 35 percent of the cost of premiums will be available this year and will reach 50 percent in 2014. The full credits are for the smallest firms with low-wage workers; the subsidies shrink as companies’ workforces and average wages rise.

Firms with more than 50 employees that do not offer coverage will have to pay a fee of up to $2,000 per full-time employee if any of their workers get government-subsidized insurance coverage in the exchanges. The first 30 workers will be excluded from the assessment.

Q: I’m over 65. How will the legislation affect seniors?

A: The Medicare prescription-drug benefit will be improved substantially. This year, seniors who enter the Part D coverage gap, known as the “doughnut hole,” will get $250 to help pay for their medications.

Beyond that, drug company- discounts on brand-name drugs and federal subsidies and discounts for all drugs will gradually reduce the gap, eliminating it by 2020. That means that seniors, who now pay 100percent of their drug costs once they hit the doughnut hole, will pay 25 percent.

And, as under current law, once seniors spend a certain amount on medications, they will get “catastrophic” coverage and pay only 5percent of the cost of their medications.

Meanwhile, government payments to Medicare Advantage, the private-plan part of Medicare, will be  frozen starting in 2011 , and cut in the following years. If you’re one of the 10 million enrollees, you could lose extra benefits that many of the plans offer, such as free eyeglasses, hearing aids and gym memberships. To cushion the blow to beneficiaries, the cuts to health plans in high-cost areas of the country such as New York City and South Florida — where seniors have enjoyed the richest benefits — will be phased in over as many as seven years.

Beginning this year, the law will make all Medicare preventive services, such as screenings for colon, prostate and breast cancer, free to beneficiaries.

Q: How much is all this going to cost? Will it increase my taxes?

A: The package is estimated to cost $938 billion over a decade. But because of higher taxes and fees and billions of dollars in Medicare payment cuts to providers, the package will narrow the federal budget deficit by $143 billion over 10 years, according to the Congressional Budget Office.

If you have a high income, you face higher taxes. Starting in 2013, individuals will pay a higher Medicare payroll tax of 2.35 percent on earnings of more than $200,000 a year and couples earning more than $250,000, up from the current 1.45 percent. In addition, you will face an additional 3.8 percent tax on unearned income such as dividends and interest over the threshold.

Starting in 2018, the law will also impose a 40 percent excise tax on the portion of most employer-sponsored health coverage (excluding dental and vision) that exceeds $10,200 a year for individuals and $27,500 for families. The tax is often referred to as a “Cadillac” tax.

The law also will raise the threshold for deducting unreimbursed medical expenses from 7.5 percent of adjusted gross income to 10 percent.

The law also will limit the amount of money you can put in a flexible spending account to pay medical expenses to $2,500 starting in 2013. Those using an indoor tanning salon will pay a 10 percent tax starting this year.

Q: What will happen to my premiums?

A: That’s hard to predict and the subject of much debate. People who are sick might face lower premiums than otherwise because insurers won’t be permitted to charge sick people more; healthier people might pay more. Older people could still be charged more than younger people, but the gap couldn’t be as large.

The bigger question is what happens to rising medical costs, which drive up premiums. Even proponents acknowledge that efforts in the legislation to control health costs, such as a new board to oversee Medicare spending, won’t have much of an effect for several years.

In November, a Congressional Budget Office report on how the legislation — which at that point had a tougher Cadillac tax — would affect premiums said big employers would see premiums stay flat or drop 3 percent compared to today’s rates. It also noted that employees with small-group coverage might see their premiums stay the same. And Americans who received subsidies would see their premiums decline by up to 11 percent, according to the CBO.

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AHIP President Hopes That’s Light In The Tunnel

WASHINGTON BUREAU — The health insurance industry has agreed to give the Obama administration detailed data on what a health reform bill must do to reduce the skyrocketing cost of health care.

The data will be available “very shortly,” a spokesman for America’s Health Insurance Plans, Washington, said today.

AHIP President Karen Ignagni promised to provide the data Wednesday during AHIP’s annual National Policy Forum.

She made her comments after Health and Human Services Secretary Kathleen Sebelius told health insurers that continued health insurance industry opposition to health reform and continued escalation of premiums will ultimately hurt the industry.

In response, Ignagni said she hoped that providing the data and Sebelius’s appearance will mark the “beginning of a change” in the tone of the health reform debate.

In comments at the conference Tuesday, Ignagni had decried the “vilification rather than problem solving” that now marks the debate over health reform legislation.

In her comments, Sebelius said that opposition to the Democratic legislation “won’t work in the long run for the American people or our healthcare system.”

Her concern, she said, is that if insurers continued to oppose Democrats’ health legislation, premium increases would continue and more small businesses would drop health coverage for their employees.

“You can continue your opposition to reform,” Sebelius said. “If you do, and reform goes down to defeat, we know what will happen.”

In response, Ignagni said after Sebelius’ comments that “insurers have been concerned that the current legislation will make the current system more expensive and not more affordable.”

Her specific concern is that health coverage mandates in the current versions of health reform legislation do not provide enough incentives to buy health insurance are not strong enough.

If enough young, healthy individuals choose not to buy insurance, “the people in the pool will be the oldest ones and the ones with the highest health problems,” Ignagni said.

At the same time, the White House issued a memorandum to all government departments calling for them to use “payment recapture audits” designed to curb waste and fraud, presumably primarily in the Medicare and Medicaid system.

This would give incentives to private auditors to examine government payments and report fraud to the agencies.

This was designed to adopt a key Republican proposal on health reform, curbing fraud and abuse in government programs.

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HEALTH LEADERS CRITICIZE OBAMA PLAN TO CREATE FEDERAL AUTHORITY OVER HEALTH INSURANCE RATES

Kaiser Health News –

Feb. 23: State insurance regulators said President Barack Obama goes too far with his proposal Monday to give the federal government new power to reject health insurance rate increases.

Three veteran state insurance commissioners said in interviews that states are in a better position to judge insurers’ premium proposals. But two of the commissioners, Sandy Praeger of Kansas and Kim Holland of Oklahoma, said they’d welcome federal advisory help. Pennsylvania’s commissioner, Joel Ario, said the federal government could also help set standards for states to use in reviewing insurance rates.

States regulate health insurance, although they vary widely on the minimum level of coverage they require of insurers and financial solvency requirements. More than half the states allow insurers to implement rate increases without first obtaining state approval.

Ario said if states and the federal government try to share the responsibility it could pose a problem because it would be unclear who has the ultimate authority. “It could end up as a ‘who’s on first and what’s on second’ problem,” he said.

He was appointed by Democratic Gov. Edward Rendell. Holland, a Democrat, and Praeger, a Republican and former president of the National Association of Insurance Commissioners, were both elected.

Obama’s proposal to create a Health Insurance Rate Authority was included in his 11-page health plan that attempts to merge the health bills passed by the House and Senate last year and restart legislative efforts to pass overhaul legislation. His proposal said the authority would “provide needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior.”

Under the plan, “if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable,” the proposal said.

Obama’s plan lacked details about how the federal rate authority would work, or for how long. Under the House and Senate health bills, individual health insurance would be sold through exchanges, marketplaces that would set standards for plans and oversee rates. The president’s plan sided with the Senate version that calls for state-based exchanges instead of one large national exchange as in the House bill. The exchanges would not start until 2013.

The new federal authority goes beyond what’s contained in either the Senate or House bills. In the past two weeks, Obama administration officials have tried to build public outrage over recent insurance rate hikes in the individual health insurance market, especially a 39 percent increase sought by Anthem Blue Cross of California, the largest for-profit health insurer in that state. Last week, the insurer agreed to postpone the increases until May 1.

Efforts to pass legislation stalled a month ago after the Democrats lost their filibuster-proof majority in the Senate with the election of Massachusetts Sen. Scott Brown, a Republican.

America’s Health Insurance Plans, the health insurers’ major lobbying group, said Monday the White House is spending too much time focusing on premium increases in the individual insurance market, which affects seven percent of those with private coverage. The group said blocking rate increases doesn’t do anything to resolve their underlying cause: rising medical costs and increased use of medical services.

The Blue Cross and Blue Shield Association said, “This new agency, which creates a highly politicized federal review process, would divorce premium review from the state regulators’ responsibility of assuring that health plans have enough funds to pay future policyholder claims, potentially leading to multi-plan insolvencies across the country.”

Praeger and Holland said creating a federal rate authority would not deal with the problems driving higher premiums. “If you want to keep costs under control, it’s not about managing health care premiums,” Praeger said, “it’s about managing the underlying health care costs.”

Holland defended state regulation of insurance. “Health insurance is very localized and states already have a number of tools to monitor rates,” she said. “Overall, I think state regulators do a good job.”

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