Spend Health Matters: Accounting for the Cost of Healthcare (Part 2)

In the first post in this series, I covered some of the actual charges companies are taking as a result of the healthcare legislation that was recently signed into law. I also provided some examples of cost reduction moves that companies might consider taking to counteract the impact of providing universal care for employees. But where are some of the added costs coming from as a result of the legislation? MetalMiner quotes a post from the National Association of Manufacturers, which highlights some areas where added costs will come from:

  • "Excise taxes on health insurance plans which would adversely impact many companies with older workforces and/or smaller self-insured plans.

  • Increase in and expansion of the Medicare hospital insurance (HI) tax, which would increase taxes on investment income and unfairly target some 70 percent of U.S. manufacturers that file taxes at the individual rate.

  • Limits on Flexible Spending Accounts (FSAs) that would curb design flexibility options for manufacturers and place an immediate tax increase on employees that use these tools.

  • New industry-specific fees that single out particular industries to pay for health care reform.

  • Repeal of the tax exclusion for prescription drug subsidies, which would significantly increase employers' costs and make it more difficult for them to continue offering health benefits to their retirees."

New healthcare costs aren't just impacting the biggest names in industry -- they're also striking at the core of the rustbelt -- a region struggling to overcome the economic downturn. According to the Pittsburgh Tribune-Review, "PPG Industries Inc. said it will take a one-time charge against its first quarter earnings of about $85 million, equal to 51 cents a share, because of the changes in the recently-passed health care reform legislation ... Alcoa Inc. said it will take a charge of about $80 million in the first quarter; U.S. Steel Corp. said it will take a $27 million charge; and Allegheny Technologies Inc. said it will take a $ 5 million charge for the same reason."

At the end of the Spend Management day, it's an almost near certain fact as more people are covered by insurance, overall costs will rise, even if they fall on an individual basis for those who are in the system (though this does not have to be a direct one-to-one relationship, mind you). There are obvious societal benefits to providing healthcare to more citizens. But with every asset tied to spending comes a liability. Spend Matters believes that unless companies find new ways of cutting costs, that the negative impact of healthcare legislation will come in the form of jobs. As MetalMiner puts it, "With uncertainty as to how health reform taxes, rules and regulations will get implemented, one thing we know for sure -- businesses will take extra precautions before hiring new workers." I could not agree more.

Jason Busch

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