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Obamacare’s Hidden Costs
While the full cost of President Obama’s health-care legislation won’t be apparent until federal subsidies to the uninsured start flowing in 2014, Americans are getting an early glimpse of some of the unintended—but very costly—consequences of rushing through a 2,400-page bill affecting 17 percent of the economy. Since the president signed the bill into law on March 23, dozens of companies have reported to the Securities and Exchange Commission the losses that they expect to take as a result of the legislation. (Companies that offer drug benefits to their retirees will now be taxed for the partial federal subsidy that they receive for each retiree.) The U.S. Chamber of Commerce estimates that as many as 40 major companies will take a hit, for a total of $3.4 billion; other cost estimates run even higher.

After the firms made headlines with these reports, the White House and Democratic members of Congress slammed them for exaggerating the tax change’s effect. Congressmen Henry Waxman and Bart Stupak even demanded that four of the companies—AT&T, Deere & Company, Caterpillar, and Verizon—turn over all documents relating to the financial impact of health-care reform, along with “an explanation of their accounting methods.” In late April, though, Democratic staffers on the House Energy and Commerce Committee vindicated the firms, saying that they “acted properly and in accordance with accounting standards.” The independent Financial Accounting Standards Board confirmed this interpretation, as did the American Academy of Actuaries....

...The same corporate documents turned over to Congress also show that companies may be thinking about more than retiree drug benefits. They may, for example, be considering dropping employee health coverage and sending workers directly into the health exchanges provided under the new law. According to Fortune, a report that Hewitt Resources, an HR consulting firm, prepared for AT&T notes that “even though the proposed assessments . . . are material”—that is, even though firms that choose not to provide health insurance will be fined—these assessments are “modest when compared to the average cost of health care. . . . Employers may consider exiting the health care market and send employees to the Exchanges.” The same Fortune article suggests that “if 50 percent of people covered by company plans get dumped, federal health care costs will rise by $160 billion in 2016, in addition to the $93 billion in subsidies already forecast by the CBO.”

Companies already expect that Obamacare will increase health-care costs as 32 million uninsured people enter the health-care system and drive up prices, new regulations add to the cost of insurance premiums, and new taxes levied on drugs, medical devices, and health insurance get passed along to employers.

Still more costs are likely to ripple out from the legislation over the next few years. Democrats have set aside just $5 billion to fund new high-risk pools for the chronically ill and uninsured until the exchanges are up and running in 2014; the chief actuary for Medicare recently estimated that the money would run out in 2011 or 2012, “resulting in substantial premium increases to sustain the program.” The CBO also recently nearly doubled its initial estimate of the legislation’s implementation costs, to $115 billion over ten years. ...