Forbes shines new light on cancelled Waxman hearings
An article in Fortune Magazine sheds new light on why Rep. Henry Waxman (D-CA), Chairman of the House Energy and Commerce Committee, summarily pulled the plug on planned hearings into why four well-known companies -- Verizon, John Deere, Caterpillar and AT&T -- announced more than a billion dollars in write-downs after the passage of health reform legislation.
Enraged that companies were exaggerating reform's impact on business, Waxman demanded thousands of pages of internal memos on company health cost projections and announced plans to bring the CEOs to DC on April 21 to grill them in public.
But those hearings were quietly canceled on April 14th when a memo from the Committee's majority staff deemed the corporate write-downs "proper and in accordance with SEC rules." The memo also suggested that the companies recognized that "the overall impact of health reform on large employers could be beneficial." Media coverage suggested that the companies had backed down, or at least moderated public criticism of reform.
A detail the memo didn't mention -- but which stunned Forbes researchers -- was evidence that all four of the companies were actively weighing the benefit of terminating their health benefit plans and sending employees to government pools for coverage. In each case, an analysis by outside consultants showed that paying government fines -- the "pay" in "pay or play" -- was likely much less expensive than continuing to offer health benefits. Politico notes that AT&T estimated paying fines would cost the company $600 million, a huge savings from than the $2.4 billion they would otherwise spend on health coverage.
The confidential documents -- ironically now readily available on the Forbes website as a consequence of Waxman's demands -- raise serious questions about how employers are likely to react to new health insurance rules and therefore the impact reform will have on federal spending.
Obama's plan was designed to create a safety net for those without access to employer-based coverage -- not to replace the entire system. All four companies insist they have no plans to drop benefits, and are likely working hard to reassure nervous employees and union representatives.
But the peek into the discussions occurring independently in each company make clear that there may be a compelling business argument for bailing out of health benefits. The Waxman Four may indeed have no plans to drop benefits. But how can we be sure other businesses will make the same choice?
If employers abandon the system en masse, the government's costs will soar -- and the deficit could grow far more massive than anyone dreamed. From all directions, the scenario is a study in the unintended consequences of insurance law.
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