Research Briefing

OBAMACARE’S NEW COSTS MAKE JOB CREATORS CONSIDER DROPPING HEALTH BENEFITS

ObamaCare Causing “What The Bill's Critics Predicted, And What Its Champions Dreaded” As Huge Employers Might Cancel Their Health Benefits. “Now we're getting a remarkable inside look at the options AT&T, Deere, and other big companies are weighing to deal with the new legislation. Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill's critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.” (Shawn Tully, “Documents Reveal AT&T, Verizon, Others, Thought About Dropping Employer-Sponsored Benefits,” Fortune, 5/5/10)

VP At Deere Said “His Company Should Look At The Alternatives” Such As “Denying Coverage And Just Paying The Penalty.” “Kenneth Huhn, vice president of labor relations at Deere, said in an internal email that his company should look at the alternatives to providing health benefits, which ‘would amount to denying coverage and just paying the penalty,’ and that he felt he already had the ability to make this change under his company's labor agreement. Caterpillar felt it would have to give ‘serious consideration’ to the penalty option.” (Shawn Tully, “Documents Reveal AT&T, Verizon, Others, Thought About Dropping Employer-Sponsored Benefits,” Fortune, 5/5/10)

That Would Break Obama’s Promise That You Won’t Lose Your Plan And “Would Hugely Magnify The Projected Costs For The Bill.” “That would dismantle the employer-based system that has reigned since World War II. It would also seem to contradict President Obama's statements that Americans who like their current plans could keep them. And as we'll see, it would hugely magnify the projected costs for the bill, which controls deficits only by assuming that America's employers would remain the backbone of the nation's health care system.” (Shawn Tully, “Documents Reveal AT&T, Verizon, Others, Thought About Dropping Employer-Sponsored Benefits,” Fortune, 5/5/10)

Companies “Predict The Bill Will Lift Rather Than Flatten The Cost Curve” And Expect “Double Digit Health Care Increases.” “Indeed, companies are far more likely to cease providing coverage if they predict the bill will lift rather than flatten the cost curve. Deere, for example said, ‘We do expect double digit health care increases as most Americans will now have insurance and providers try to absorb the 15% uninsured into a practice.’ Both Caterpillar and Verizon believe the requirement to allow dependents to remain on their parents' policies until age 26 will prove costly. Caterpillar puts the added expense at $20 million a year.” (Shawn Tully, “Documents Reveal AT&T, Verizon, Others, Thought About Dropping Employer-Sponsored Benefits,” Fortune, 5/5/10)

AS MORE JOB CREATORS ARE CONTINUING TO GET HIT … 

Houston, TX-Based El Paso Corporation Took An $18 Million Hit Because Of ObamaCare. “El Paso Corporation is today reporting first quarter 2010 financial and operational results for the company. … This increase was partially offset by $18 million of additional income tax expense due to healthcare legislation enacted in March 2010, which reduces the tax deduction for certain retiree prescription drug expenses.” (“El Paso Corporation Reports Strong First Quarter 2010 Results And Significant Progress Toward 2010 Objectives,” Press Release, 5/6/10)

Virginia Tanning Salon Owner Calls ObamaCare’s Tanning Tax “Ridiculous” And Says It’s “Just Another Thorn, Another Kick In The Shin Toward Small Business.” “There's a new tax on tanning salons is starting this summer to help pay for healthcare reform. ‘I think it's ridiculous,’ said Betty West. West owns tanning salons in Salem and Roanoke. ‘It's been hard enough in this economy in the last year and half,’ said West. ‘This is just another thorn, another kick in the shin toward small business.’” (“A New Tanning Tax May Burn You,” WDBJ7.com, 5/5/10)

Florida Tanning Salon Owner Also Calls The Tax “Ridiculous” And Goes On To Say “It’s Unconstitutional And It Really Hurts Small Businesses” And “Will Hurt Our Bottom Line.” “Cheryl Calderone, owner of Boca Tanning Club in Coral Gables, said her business will have to lower prices in order to minimize the impact of the tax on customers. ‘It's a ridiculous tax. It's unconstitutional and it really hurts small businesses,’ she said. ‘We don't anticipate passing the cost on to our customers, but that will hurt our bottom line.’” (Toluse Olorunnipa, “10 Percent Tax Going Into Effect At Tanning Salons,” The Miami Herald, 5/5/10)

• Another Florida Tanning Salon Owner Says She’s “Not Thrilled” About The Tax. “As July 1 approaches, local tanning salon owners are waiting to get more details about the tax, and also waiting to see how customers will react to the price increases. ‘I'm not thrilled, I can tell you that,’ said Magic Tan owner Catherine Howell. ‘It's going to affect the client, and people might start cutting down on the services they get.’” (Toluse Olorunnipa, “10 Percent Tax Going Into Effect At Tanning Salons,” The Miami Herald, 5/5/10)

“A FLOOD OF NEW TAX PAPERWORK” WILL ONLY MAKE THEIR PAIN WORSE

ObamaCare Will “Swamp U.S. Businesses With A Flood Of New Tax Paperwork” By “Radically Alter[ing] The Nature Of 1099s.” “An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork. … The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.” (Neil deMause, “Health Care Law's Massive, Hidden Tax Change,” CNNMoney.com, 5/5/10)

Starting In 2012, Companies Will Have To Send 1099s To Contract Workers, Individuals, And Corporations If They “Buy More Than $600 In Goods Or Services [From Them] In A Tax Year.”  “Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year. … But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.” (Neil deMause, “Health Care Law's Massive, Hidden Tax Change,” CNNMoney.com, 5/5/10)

• “‘It's A Pretty Heavy Administrative Burden,’ Particularly For Small Businesses Without Large In-House Accounting Staffs, Says Bill Rys, Tax Counsel For The National Federation Of Independent Businesses.” (Neil deMause, “Health Care Law's Massive, Hidden Tax Change,” CNNMoney.com, 5/5/10)