Verizon Reports 1Q Earnings Reduction of $970 Million Because of Health Care Law

Verizon Communications Inc. announced late tonight that it will incur a $970 million loss of earnings because of the new federal health-care law, according to a Bloomberg report by Amy Thomson and Olga Kharif.

The one-time, non-cash cost will be taken in the first quarter, New York-based Verizon said late today in a regulatory filing.

Verizon follows AT&T Inc., the biggest U.S. carrier, Deere & Co., Caterpillar Inc. and other companies in disclosing similar expenses after losing a tax benefit for retiree plans. The costs may reduce corporate profits by as much as $14 billion as companies account for the impact of the health-care reforms, according to benefits consulting firm Towers Watson.

“While it is a non-cash charge, it does reflect real value destruction, based on expected cash flows over the life of the company,” said Jonathan Schildkraut, an analyst at Jefferies & Co. in New York. Schildkraut, who expected the expense to be about $750 million, advises investors to buy Verizon shares and doesn’t own any himself.

A charge-off, made by a company against earnings, does not require an initial outlay of cash. Non-cash charges are typically against the depreciation, amortization and depletion accounts on a company's balance sheet. Companies take these charges against earnings because of extraordinary circumstances such as accounting policy changes or significant depreciation of asset's market value. Any sort of charge will usually result in lower earnings in the period when the charge was made. They are sometimes also referred to as a write down.

Many large companies made similar announcements today as corporate America's balances sheets took huge hits. Reuters complied this list of companies announcing the write downs:

* 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.

* Deere & Co., a maker of farm equipment, said it expected to record a $150 million charge, mostly in its current fiscal second quarter.

* No. 2 plane maker Boeing said it would take an income tax charge of $150 million, or 20 cents per share, against first-quarter results.

* Caterpillar said accounting standards required 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.

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

* Lockheed Martin Corp., the world's biggest defense contractor, said it expected to record a $96 million after-tax charge in the first quarter, which would translate to around 25 cents per share.

* 3M Co., which makes products ranging from Post-It notes to optical films for flat-panel televisions, will record a one-time, noncash charge of up to $90 million, or 12 cents per share.

* Ingersoll-Rand Plc, a maker of air compressors and cooling systems, expects to record a noncash charge of $41 million, or 12 cents a share.

* AK Steel Holding Corp. will record a noncash charge of about $31 million in the first quarter.

* Eaton looks for a $25 million noncash charge in the first quarter.

* Diversified manufacturer ITW said it would take a $22 million charge for the change, lowering its first-quarter earnings per share by 4 cents.

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

* Honeywell International Inc. expects a one-time charge of $13 million related to the health care legislation.

* Aircraft parts supplier Goodrich Corp. sees a first-quarter charge of about $10 million, or 8 cents per share.

* Carpenter Technology looks for a $5.9 million, 13 cent- per-share, charge.

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

In the meantime, Congress is pushing corporate chief executive officers to come to Capitol Hill to prove to Democrats that these companies will actually incurr those costs.

Energy and Commerce Subcommittee Chairman Henry Waxman (D-Calif.) and subcommittee chairman Bart Stupak (D-Mich.) announced that the Subcommittee on Oversight and Investigations will hold a hearing on April 21 to hear from executives from Caterpillar, Verizon, Deere and AT&T.

Waxman and Stupak, according to Livia Sappington of World News Vine, say that the claims by the companies are without merit and “are a matter of concern” as the Congressional Budget Office reported that large companies employing more than 50 employees would save on premium cost up to 3 percent per person by 2016. ...

... an association of chief executive officers from leading U.S. companies, The Business Roundtable asserted last November that a savings of more than $3,000 per employee would be attained in the next ten years as a result of the new legislation. The committee requested that the four companies present any reports prepared relating to how health care reform might impact their businesses; any documents or e-mail messages between executives relating to such analysis, and the explanation of accounting methods resulting in their conclusions.

Effects of Health Care Law Worry Small Businesses But Pharmaceuticals See a Boom

Small businesses are concerned about the effects of the health care law, but pharmaceutical companies are expecting a huge booom to thier bottom line. The U.S. drug industry fended off price curbs and other hefty restrictions in the health care law even as it prepares for plenty of new business when an estimated 32 million uninsured Americans gain health coverage.

Steve LeBlanc of The Associated Press today examines the concerns that small businesses have over the new health-care law in his article today:

The national law doesn't require businesses offer insurance but hits employers with 50 or more workers with an annual $2,000-per-employee fee if the company doesn't insure them and the government ends up subsidizing their workers' coverage.

The national law also grants tax credits for businesses with 25 or fewer workers with average annual wages below $50,000, which Democrats say that will benefit 3.6 million business nationwide. And beginning in 2014, businesses with up to 100 employees will be able to pool their employees in state-created insurance exchanges to increase their negotiating clout with insurance companies - a move supporters say could aid 29 million businesses.

... Such penalties make Doug Newman, owner of Newman Concrete Services in Richmond, Maine, nervous. In the past 18 months, as the economy battered the construction industry, Newman's work force shrunk from 125 employees to just 25.

He is worried that once the economy turns and he begins to hire back workers, he'll face a critical decision when he nears the 50-worker mark and is no longer exempt from penalties. Newman now pays 60 percent of his employees' individual premiums and 40 percent of their family premiums.

"The 51st employee could mean $100,000 in costs. I've been calling it the concrete ceiling," he said. "No employer is going to hire No. 51 if it brings all these mandates down on you, because they're pretty onerous."

Don Day is also worried. Day owns eight small businesses in McKinney, Texas, including two restaurants, a boutique hotel and several retail shops.

Although he employs 125 workers, he offers health care for just a few key employees. Just an extra $200 a month per employee for health care could set him back hundreds of thousands of dollars a year - a cost he can't afford.

"It's not just me, it's every small business across this land," he said. "A lot of small businesses are going to go out of business."

It would seem like an easy decision for any small business in 2014. Drop health care as a benefit and pay the fine. With health-care premiums well above $7,000 a year for businesses, you would be saving $5,000 a year.

This may be good for the individual business, but bad for the taxpayers, as each taxpayer would have to pick up the tab to subsidize those going into the exchanges.

The story also talks about employers welcoming the new law:

Rand's Do It Best Hardware store on Main Street in Plymouth, N.H., has been in owner Steve Rand's family for more than a century. About a decade ago the company switched from providing a full health care plan to having employees share in the cost of rising premiums.

Since then, those costs have spiraled out of control and Rand hopes the new law lets him pool his workers in state-run exchanges to increase his purchasing power.

"This legislation is really a positive step in the right direction, allowing us to get back in the business of making our company able to offer a health plan," Rand said.

Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation - which supported the state law - said the requirement for near-universal coverage has been a much bigger issue for local businesses than the fines for not offering insurance.

That provision, known as the individual mandate, is costing local businesses between $500 million and $750 million extra annually, he said.

"There is no doubt that with the individual mandate there will be more employers picking up the tab," he said.

Large pharmaceuticals are also big winners in the new law.

The U.S. drug industry fended off price curbs and other hefty restrictions in the health care law even as it prepares for plenty of new business when an estimated 32 million uninsured Americans gain health coverage.

Lobbyists beat back proposals to allow importation of low-cost medicines and to have Medicare negotiate drug prices with companies. They also defeated efforts to require more industry rebates for the 9 million beneficiaries of both Medicare and Medicaid, and to bar brand-name drug makers' payments to generic companies to delay the marketing of competitor products.

The impressive list of wins is testament to a carefully planned and well-financed lobbying strategy, led by Pharmaceutical Research and Manufacturers of America, the industry's deep-pocketed trade group. The trade group has been led by former Louisiana U.S. Rep. Billy Tauzin, a Democrat, whose $4.5 million in earnings in 2008, the most recent figure available, underscore the high stakes for the industry.

Costly brand-name biotech drugs won 12 years of protection against cheaper generic competitors, a boon for products that comprise 15 percent of pharmaceutical sales. The industry will have to provide 50 percent discounts beginning next year to Medicare beneficiaries in the "doughnut hole" gap in pharmaceutical coverage, but those price cuts plus gradually rising federal subsidies will mean more elderly people will purchase more drugs.

15 Newspapers Ignored Health Care Vote on Page 1

Fifteen newspapers did not see the news value of putting the health-care vote in the House on their front pages today, according to a survey completed by Dylan Stableford at The Wrap.

These are small papers, and many probably faced tight deadlines with the late-night vote. But as they say on ESPN: "C'mon man!"

Here they are, along with the subjects of their top front-page stories:

Benton County Daily Herald, Bentonville, Arkansas
Spring snowstorm.

Northwest Arkansas Times, Fayetteville, Arkansas
"Overnight accumulation leaves Northwest Arkansas roads slippery."

The Morning News, Rogers, Arkansas
Spring snowstorm.

Stars and Stripes, Washington, D.C.
NCAA “bracket busters.”

Palm Beach Daily News, Palm Beach, Florida
"Census Forms Arriving in the Mail."

Tampa Bay Times, St. Petersburg, Florida
A story on Hollywood's suddenly feeble leading men pegged to Ben Stiller's "Greenberg" character.

Commercial-News, Danville, Illinois
Photos of a maple syrup open house.

Herald-Press, Huntington, Indiana
School staff reduction.

Peru Tribune, Peru, Indiana
A local cattle show.

Wabash Plain Dealer, Wabash, Indiana
Fatal car crash at intersection kills two.

Cecil Whig, Elkton, Maryland
Fire destroys home, and runaway emu found.

AMnewyork, New York City
Teen subway mugging.

The High Point Enterprise, High Point, North Carolina
"Bus seat belts not likely."

The Mount Airy News, Mount Airy, North Carolina
"Boy Scouts learn skills at Merit Badge College."

Bluffton Today, Bluffton, South Carolina
Construction of a new middle school gym.

What Is In the Senate Health Care Bill?

So, what's exactly in the Senate health care bill? Reuters' Donna Smith had these answers when the bill was first passed:

Q: What does the Senate bill do?

A: The bill would significantly change the $2.5 trillion U.S. health care system that almost everyone agrees costs too much and leaves too many people without medical coverage. For the first time in U.S. history, citizens and legal residents will be required to purchase a health insurance policy.

Federal subsidies will be available to help them afford coverage. The subsidies will be available for people with incomes up to 400 percent of the poverty level, about $88,200 for a family of four. The poverty levels for 2009 is $22,050 a year for a family of four and $10,830 for an individual.

Small businesses will be able to tap into federal tax benefits to help buy medical plans for employees.

Employers are not required to provide health coverage for workers, but they would have to pay a penalty if any employees use federal subsidies to purchase insurance.

Q: Where will people get their medical insurance?

A: Most people get their coverage through their employer and that will not change under this bill.

Small businesses and people without employer-sponsored insurance have struggled in recent years to obtain affordable health coverage. For those groups, the bill creates new state-based insurance exchanges where they can shop for policies. Federal subsidies will be available to people purchasing medical coverage through the exchanges, which are expected to be up and running by 2014.

Liberal Democrats wanted a new government-run insurance plan to be one of the options offered on the exchange to compete with private insurers and help keep a lid on insurance premiums. Republicans and a few moderate Democrats opposed the idea and it is being dropped from the Senate bill in order to win the votes necessary to pass it.

The government option remains in the bill passed by the U.S. House of Representatives in November.

The Senate bill now will ask the U.S. Office of Personnel Management, which oversees health plans for 8 million federal workers and their families, to contract with private insurance companies to offer plans on the exchanges.

Millions of people, with income up to 133 percent of poverty, will be newly eligible for Medicaid, the health program for the poor. Currently many states set eligibility requirements well below that level of poverty.

Q: Are there protections for consumers?

A: Yes. Insurance companies will no longer be able to deny coverage to anyone because of a pre-existing condition. They also will not be able to charge higher premiums because of gender, health history or occupation. Insurers also will be prohibited from dropping people when they get sick.

There will be no more lifetime limits on coverage and annual limits will be restricted. Insurers also will be required to cover preventive healthcare services. Co-payments and other out of pocket expenses for beneficiaries also will be limited.

Q: What do insurance companies and hospitals get?

A: Insurance companies will get 31 million more customers, many of them subsidized by the federal government. However, in addition to new coverage regulations, insurers will be required to spend a minimum of 85 cents of every premium dollar on medical care for large group plans and 80 cents on every premium dollar for individual and small group plans.

By requiring everyone to obtain insurance, hospitals will have fewer cases of uncompensated care. Many people without insurance seek care at hospital emergency centers because they do not turn away patients. When patients are unable to pay, hospitals make up those losses by charging more to those with insurance. Democrats say that pushes premiums higher by about $1,100 a year.

Q: How does the bill reduce costs?

A: The bill seeks to save money by streamlining paperwork and providing more information to consumers to help them make decisions about their health care.

Other cost savings will be driven through Medicare, the government healthcare program for the elderly and Medicaid. Lawmakers hope that payment reforms that reward quality rather than quantity of services and treatments will help drive down costs. The bill aims to encourage coordinated care for patients particularly those with chronic conditions.

Studies have shown that better coordinated care can save significant amounts of money and improve the quality. The bill will provide for pilot programs to explore some of those cost saving methods for Medicare and Medicaid.

It also will encourage creation of Medical Homes and Accountable Care Organization where doctors, hospitals and other health providers can better coordinate care.

Ed Schultz on Dick Cheney: We Ought to Rip Out His Heart, Kick It Around, and Stuff It Back in Him

MSNBC personality and radio talk-show host Ed Schultz had some choice words aout former Vice President Dick Cheney's recent heart problems:

You're damn right, Dick Cheney's heart's a political football. We ought to rip it out and kick it around and stuff it back in him. I'm glad he didn't tip over. He is the new poster child for health care in this country.

... And we want Shooter to make it. Hell, we hope he goes and shoots somebody else in the face. That was a helluva story way back when.

... How come Dick Cheney's health care isn't being dropped? Do you realize that if you had five heart attacks, hell, you wouldn't get past two heart attacks and they'd dump you.

But because you're a war criminal and because you are on the take from Haliburton and you had these executive meetings in 2001 back in the, you know, the days of the rolling blackouts and executive privilege on how we're going to develop energy policy in this country, you do stuff like that, hell, you can get the best health care on the face of the earth.

Nice, very classy. Tony Kornheiser got suspended from ESPN for remarks that were no where near as offensive. I'm sure MSNBC (which by the way, stands for "Must See Nothing But Curling," according to Chuck Todd) will let it go.

Obama to Tell Senators This Is America's Last Chance for Health-Care Reform

When President Barack Obama will tell all 60 senators in the Democrat Caucus today that this is America's last chance for reforming health care, POLITICO reports this morning.

Sen. [Joe] Lieberman’s [I-Conn.] rejection of the Dem leadership’s compromise, which had put the Senate on track to pass reform by Christmas, makes it possible (though still unlikely) that the measure will collapse. The West Wing believes that it is still on track to pass, but that there remains a chance it doesn't. So with the days ticking away, Obama will spell out the stakes in increasingly apocalyptic terms.

White House Communications Director Dan Pfeiffer: "If President Obama doesn't pass health reform, it’s hard to imagine another president ever taking on this Herculean task. For those whose life's work is reforming health care, this may be the last train leaving the station.

If Obama does not pass health care in this environment -- with 60 senators and a large House majority -- no president will ever attempt it again. This is the last chance to reform the system in a comprehensive way. There are people in the middle and on the left who are quibbling over pieces of this. They seem to believe if this bill goes down, there will be a second chance. There won’t be. Congress won’t come back to health care next year: It will be all jobs. The next president will not stake political capital on this. If Clinton and Obama can’t get it done, no one else will try."

Pelosi's Bill: Buy a $15,000 Health Care Policy for Your Family or Go to Jail

Ranking member of the House Ways and Means Committee Dave Camp (R-MI) yesterday released a letter from the non-partisan Joint Committee on Taxation (JCT) confirming that the failure to comply with the individual mandate to buy health insurance contained in the Pelosi health care bill (H.R. 3962, as amended) could land people in jail.

The JCT letter makes clear that Americans who do not maintain “acceptable health insurance coverage” and who choose not to pay the bill’s new individual mandate tax generally 2.5% of income), are subject to numerous civil and criminal penalties, including criminal fines of up to $250,000 and imprisonment of up to five years.

According to the Congressional Budget Office the lowest cost family non-group plan under the Speaker’s bill would cost $15,000 in 2016.

"Although premiums under H.R. 3962 would vary by geographic area to reflect differences in average spending for health care and would also vary by age, the table shows the approximate national average for that lower-cost reference plan —about $5,300 for single policies and about $15,000 for family policies in 2016," according to a CBO letter by Douglas W. Elmendorf, director, sent to Rep. Charles Rangel on Nov. 2.

In response to the JCT letter, Camp said: “This is the ultimate example of the Democrats’ command-and-control style of governing – buy what we tell you or go to jail. It is outrageous and it should be stopped immediately.”

Criminal penalties could range from misdemeanor willful failure to pay is punishable by a fine of up to $25,000 and/or imprisonment of up to one year or a felony willful evasion is punishable by a fine of up to $250,000 and/or imprisonment of up to five years.”

Health Care: How Many Are Actually Uninsured?

We've all heard the number: 45.7 million Americans are without health care. This has been a driving argument for the passage of some kind of federally sponsored health-care program.

But is the number real? Is it overstated, or even understated?

FactCheck.org's Jess Henig took a look at the data, and comes to the conclusion that it may not be as high as that, but because of the job losses over the past months the number is likely to increase.

•The Census Bureau estimates that 45.7 million lacked health insurance at any given time in 2007. But fewer lacked coverage for the full year, and more did without for one or more months during the year. All three numbers are likely to be higher for 2008 due to massive job losses.

•Twenty-six percent of the uninsured are eligible for some form of public coverage but do not make use of it, according to The National Institute for Health Care Management Foundation. This is sometimes, but not always, a matter of choice.

•Twenty-one percent of the uninsured are immigrants, according to the Kaiser Family Foundation. But that figure includes both those who are here legally and those who are not. The number of illegal immigrants who are included in the official statistics is unknown.

•Twenty percent of the uninsured have family incomes of greater than $75,000 per year, according to the Census Bureau. But this does not necessarily mean they have access to insurance. Even higher-income jobs don't always offer employer-sponsored insurance, and not everyone who wants private insurance is able to get it.

•Forty percent of the uninsured are young, according to KFF. But speculation that they pass up insurance because of their good health is unjustified. KFF reports that many young people lack insurance because it's not available to them, and people who turn down available insurance tend to be in worse health, not better, according to the Institute of Medicine.

Rangel: Health-Care Reform Needs $600 Million in New Taxes and Will Cost $1 Trillion

OK, it's not as famous as the other campaign promise of "read my lips, no new taxes." But does anyone remember this?



"I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes."
--Sen. Barack Obama, campaigning in Dover, Del., on Feb. 4, 2009

Well, you can pretty much toss that aside. House Democrats and administration officials are now working on the details of their proposed health-care industry overhaul; and the effect on your wallet is going to be significant.

House Ways and Means Committee Chairman Rep. Charles Rangel, Democrat from New York, told Laura Litvan of Bloomberg that the cost of the overhaul will exceed $1 trillion. That figure will come from a combination of $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid.

Rangel also said the measure’s cost will reach beyond the $634 billion Obama proposed in his budget request as a down payment for the policy changes.

How the legislation will read in the end is anybody's guess. There are two 700-page public verisons of the bill right now, and the over/under on the number of people who have actually read through all of both bills is three. But media reports say House and Senate Democrats are working on legislation forcing all Americans to have health insurance, prohibit insurers from refusing to cover pre-existing conditions and place other restrictions on the industry.

Another component of the legislation is the establishment of an online exchange for individuals to purchase insurance. Reports say it would require employers to provide health benefits to workers or pay a penalty. In addition, some Democrats want a federal program to expand coverage to the uninsured.

One could already predict the reactions. For instance, businesses are planning their strategy in opposition, as described by Patrick Yoest of Dow Jones Newswires:

The employer groups, which include the U.S. Chamber of Commerce and the National Federation of Independent Business, have organized meetings Friday to discuss health-care legislation written by Democrats on the Senate Health, Education, Labor and Pensions Committee.

According to a person with knowledge of the meetings, the groups will brief other business organizations on "what we have been advocating for and against, and where that process has taken us, based on the draft bill."

The groups meeting could play a major role in determining how difficult it will be for Democrats to pass that legislation.

Following the meetings, "a coalition may emerge to reinforce, to push back on some things or, to advance other issues in tandem," said the person.

In a statement Thursday in a hearing of the Senate Health panel, the U.S. Chamber of Commerce was highly critical of the committee's bill.

"The Chamber is gravely concerned by the process and the product thus far," the statement said. "As badly as reform is needed, we cannot support reform just for the sake of reform."

Shawn Tully of Fortune magazine had this analysis:

The crucial question about Obama's agenda has always been whether it really will slow the disastrous rise in health-care spending, or actually increase it while hiding the real costs of the new system. On analyzing the bills, the conclusion is inescapable: Obama promises Americans what appears to be a bargain by heavily subsidizing their premiums. But the only way to pay for what's really outrageously expensive coverage will be huge tax increases, especially on the same middle class that's being wooed as the chief beneficiary of reform.

The plans contain four proposals that will substantially weaken the ability of the market, already limited by burdensome regulation, to restrain medical spending.

First, they will impose rich, standard packages of benefits, with low deductibles, for all Americans. Those policies, typically containing everything from in-vitro fertilization to mental health benefits, are usually far more expensive than anything most people would pay for with their own money.

Second, the plans would impose on a federal level the doctrine of community rating, in which all customers have to be offered the same rates, regardless of their health risks. Community rating forces young people to pay far more than their actual cost, a main reason for today's 46 million uninsured, while it subsidizes older patients.

Third, Obama would ban consumers from buying private insurance across state lines, perpetuating the price differences in today's fragmented market, instead of allowing all Americans to shop anywhere for the best deals.

Fourth, both plans propose what's known as a "public option," or a Medicare-style plan that would compete with the private offerings. The previous three proposals would make the private plans extremely expensive. With the same subsidies, the Medicare-style plan could put them out of business.

Before we get into the specifics of each problem, it's important to note that Obama's health-care plan is not included in his 2010 budget. The administration pledges that his health-care plan won't expand the deficit because it will be entirely paid for by tax increases. But even if the deficit stays the same, spending and taxes will be far from the same. By most estimates, Obama's plan will cost more than $200 billion a year by 2019. All told, government outlays as a share of GDP are projected to reach 26% by that point, up five percentage points from when Obama took office.

He examines the cost to Americans in detail, and it's well worth your five minutes to jump over on the link to read them. But his conclusion is this:

The demand for everything from knee surgery to mental health counseling will soar. But the government will keep a lid on prices, so Americans, for the first time, will be faced with rationing. The hospitals and physicians simply won't be able to satisfy the unhinged demand for the services that look like a bargain.

The lines will grow. And so will the spending, and the taxes. And that's what Obama isn't telling you.

In light of all the criticism, Obama is on the offensive, using the tool he knows best: face-to-face communication with the American public. Here is what he had to say in Green Bay, Wis., on Thursday, as reported by Philip Elliott of the Associated Press:

Undertaking an aggressive new effort to push a major health-care measure through Congress by August, Obama rebuked critics from both the right and left -- conservatives who say his support for creating a government-sponsored insurance option alongside private coverage would send the country toward an unsustainable nationalized plan, as well as liberals who are concerned he won't go far enough to mandate universal coverage.

Obama said the question of what to do about health coverage, which has vexed Washington for decades, has reached near-emergency status.

"I know there are some who believe that reform is too expensive, but I can assure you that doing nothing will cost us far more in the coming years," Obama said. "Our deficits will be higher. Our premiums will go up. Our wages will be lower, our jobs will be fewer and our businesses will suffer."

By the way, his report quotes the cost as $1.5 trillion over 10 years.