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To big business, it seems to make more “dollars and sense” to simply drop employee health coverage

May 13th, 2010  |  Lucas Otto

There is little in today’s “the sky is falling” economy that employers and employees agree on. Employees want higher wages, while employers want to cut costs to increase the bottom line, or employees want more paid time off from work, while employers want more productivity and less “you” time. Yet, both sides probably always agreed that a healthy employee was a happier, more productive employee. Yet, even that may be falling to the side as many large companies investigate whether it “pays” to still provide employees with health care coverage after the landmark health care bill was passed, or if it simply makes more “dollars and sense” to simply take the penalty and drop employer health care coverage all together.

In a recent article on CCNMoney.com, it was reported that “[i]nternal 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.” In fact, the article noted that a report produced by the Congressional Energy Committee failed to mention that four large companies (AT&T, Verizon, Caterpillar and Deere) had all weighed “the costs and benefits of dropping their coverage.” In particular that article claimed that:

“AT&T produced a PowerPoint slide entitled ‘Medical Cost Versus No Coverage Penalty.’ A document prepared for Verizon by consulting firm Hewitt Resources stated, “Even though the proposed assessments [on companies that do not provide health care] are material, they are modest when compared to the average cost of health care,” and that to avoid costs and regulations, “employers may consider exiting the health care market and send employees to the Exchanges.” (Under the new bill, employees who lose their coverage will purchase health care through state-run exchanges.)

 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.”

So, after reading all this, one could pose the question: Has this health care bill actually helped big business more than its employees? It is certainly a fair assessment, since by Fortune’s calculations, “Caterpillar…could reduce its bill by over 70%,” and AT&T, who revealed that it spends “$2.4 billion a year on coverage [would see that number] fall to $600 million if AT&T stopped providing health care coverage and paid the penalty option instead.”

This isn’t suggesting that the health care bill is bad for the average individual, or for employees in any way. However, it seemed when it was passed that one of its purposes was to either help those who  could not afford insurance, or to help those whose companies did not provide insurance. Now, with these kinds of cost cutting analyses being commission by large businesses, one wonders if the millions of people working in those large companies that decide to pay the penalty will soon have to ask the same question as those now without health insurance: Who is going to cover me now?