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Companies: Cheaper to pay penalty than keep our health plans

Christian Schappel
by Christian Schappel
October 27, 2010
2 minute read
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How much cash would your company have to save by dumping its health plan – in exchange for paying penalties – to make up for the ill will it would create among workers?
Bad news for lawmakers that just assumed companies would keep providing health coverage even after the reform law’s mandates kicked in: New evidence shows that four major employers — Verizon, AT&T, John Deere and Caterpillar — have crunched the numbers so see whether they should “play or pay.”
Their conclusion? It’ll be cheaper — way cheaper — to pay the penalties to the government and drop their employee health insurance plan.
Huge savings
Of course nobody thought a company would pull the rug out from its employees by actually dropping coverage. But then again — nobody thought dropping coverage to pay a penalty would save a company 75%, and nearly $1.8 billion, off its healthcare bill. That’s what AT&T calculated it would save.
Caterpillar came to the same conclusion. It said it could shave 70% off its bill by doing the same thing.
These findings come from internal documents recently reviewed by Congress.
The companies didn’t intend for this information to become public. It did so as a result of demands by Rep. Henry Waxman (D-CA) that the companies turn over all of their internal documents to Congress relating to healthcare reform compliance.
A real possibility
With so much savings involved, it no longer seems unrealistic that employers would drop their health plans and essentially give employees a “raise” to buy coverage on state insurance exchanges.
Of course this would fly in the face of President Obama’s statements about health reform that Americans who like their plan would be able to keep them.
However, none of the four companies commented in their reports as to whether they would actually drop their coverage.
Would your company consider dropping employee health coverage once the reform law’s 2014 “play or pay” mandate kicks in? Share your opinions in the Comments Box below.

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