WASHINGTON -- President Obama's signature on his health care bill was barely dry before businesses began announcing that its costs would reduce their earnings and could lead to cuts in prescription-drug benefits.
After crunching the health care plan's tax consequences, a surprising number of companies announced they would be taking charges on future earnings because of tax law changes in the bill.
First came heavy-construction equipment manufacturer Caterpillar that said the tax hikes would result in a $100 million drag on their first quarter because the bill Obama signed will cut the tax deduction businesses are given to provide their retirees with health care benefits.
One by one, other companies followed suit, announcing charges they will be forced to take because the higher tax levies will cut back earnings at a time when the economy remains very weak and many businesses are still struggling to keep their head above water.
AT&T said it would take a $1 billion first quarter charge, too, along with farm machinery manufacturer John Deere Co., Valero Energy, AK Steel Corporation and 3M who said they would take smaller charges.
Prudential Financial Inc. announced that it would take a $100 million charge against earnings in response to the $1 trillion health care bill's tax consequences on employers.
U.S. aircraft giant Boeing said it, too, planned to record a $150 million charge in the first three months, as estimates of the bill's true costs began rolling in from corporate tax crunchers. Towers Watson, a worker-benefits consulting firm, forecasts that government-imposed health care costs may cut up to $14 billion from U.S. corporate profits.
Critics of the health care law have long maintained that it would lead to higher taxes on businesses that would drive up their health care costs that would in turn result in higher worker premiums, fewer employer-provided health care benefits or both.
AT&T said it planned to assess their own company health care costs and possibly reduce employee benefits.
Driving the latest employer cost charges are the sweeping health care law's increases in business taxes. Companies providing prescription drug benefits for millions of retirees have been getting generous subsidies that cover 28 percent of their costs and thus were allowed to deduct all of their benefit expenditures, including the subsidy, from their taxable income.Their costs will jump significantly because the new law allows them to deduct only their own expenditures, minus the subsidies. The companies are taking charges now to reflect the higher taxes they will have to pay in 2013.
But business analysts say the health care plan's tax consequences will not stop here. Business could decide to cut their drug benefits, denying prescription drug coverage for up to 2 million retirees.
That could force many retirees into the Medicare Part D drug benefits program, where in some cases their prescription costs could be higher.
And it isn't just businesses who are reacting to the law's future impact. State governments are also bracing for huge additional costs at a time when their cash-strapped treasuries are running deeper into debt.
California, for example, has just announced that Obamacare will add between $2 billion to $3 billion a year to its mounting bills that will most likely be passed on to the state's beleaguered taxpayers.
But all of this is just the proverbial tip of the iceberg to the costs that will be hitting businesses and individual taxpayers alike, providing Republican candidates with a powerful political issue in the midterm elections to come.
"Just hours after popping the champagne and patting themselves on the back for passing a trillion-dollar government health care plan that raises taxes by hundreds of millions of dollars, reality is setting in for the Democrats," Texas Sen. John Cornyn, chair of the National Republican Senatorial Committee, said in a memo to GOP Senate candidates last week.
Fifty percent of voters oppose Obamacare, and Democrats say it's going to hurt their party in November.
Here's what Democratic pollster Doug Schoen had to say last week to Politico.com: "It's pretty clear to me that public opinion is arrayed against the plan. And among swing voters, opinion is even more against the plan. I don't think there's any evidence it will be good politically, except for maybe some marginal impact firing up the base ... Them's the facts."
Now come those town hall gatherings with voters who packed meeting rooms last summer to rail against Obamacare. Only this time, in the heat of an election, they'll make last August look tame by comparison.
An indication of what the Democrats will be facing was on full view last week at several candidate forums in New Hampshire where Democratic Reps. Carol Shea-Porter and Paul Hodes, who's running for the Senate, encountered angry receptions.
Shea-Porter "was booed and called a liar, and Paul Hodes couldn't get a senior citizen to shake his hand" at forums in Manchester, according to a front-page account in the Union Leader under the headline, "Health care reform proves tough sell."