Author: Dan Pfeiffer

(This guest post previously appeared at The White House blog)

There has been a lot discussion about reports that some businesses are expecting some additional costs from health reform.  The problem doesn’t lie with corporate accounting, it lies with those who have politicized that accounting, treating first quarter earnings from about a dozen companies as a way to judge the entire impact of health reform on America’s business.

The markets didn’t make that mistake. And today, a New York Times editorial elaborates on why the critics have it wrong.

As we’ve explained, the 2003 Medicare prescription drug bill included not only a subsidy to help companies pay for retiree prescription drug coverage, but also allowed them to deduct that subsidy from their taxes as if it was their own spending. Thus the headline of the editorial: “We Call That Double-Dipping.” After health reform was signed, which kept the subsidy in tact but simply eliminated the ability to deduct the subsidy as well, affected companies posted earnings figures indicating they had taken big losses as a result of this change — but as the editorial says:

Those look like staggering amounts until one understands that they don’t require any immediate cash payments and that the added taxes will be paid out slowly — over perhaps 30, 40 or more years, depending on a company’s retiree plan.

Wall Street certainly gave a collective yawn. Stock prices for the companies that made announcements barely budged (some went up), and analysts urged investors not to overreact because the accounting change would have a negligible impact on these companies’ valuation, or market capitalization.

As for the question of how this change will affect seniors, the editorial closes on this note:

The remaining tax subsidy is substantial and many companies and their workers value the retiree drug benefit, so defections may be small. If some retirees do lose their company drug benefits, they can buy government-subsidized coverage in Medicare that may be just or almost as good and will be getting better as health care reform progresses. Willing employers could also help subsidize their retirees’ drug coverage in Medicare.

That’s the least they should do in return for the generous tax benefits they have been receiving.

Dan Pfeiffer is White House Communications Director

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(This post previously occurred at The White House blog)

The last few days have brought even more evidence that the health care status quo is working out great for the insurance companies – at the same time as it continues to fail American families and businesses. No wonder the insurance companies are spending millions and millions of dollars to block reform.

On Wednesday, a leading insurance broker laid out in clear terms what many Americans could already guess: the insurers’ monopoly is so strong that they can continue to jack up rates as much as they like – even if it means losing customers – and their profits will continue to soar under the status quo.

Speaking about the lack of competition – a key target of reform – broker Steve Lewis told investors on a conference call organized by Wall Street giant Goldman Sachs:

“Not only is price competition down from year ago (when we had characterized last year’s price competition as being down from the prior year), but trend or (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes…”

What does it mean when the insurance companies “walk away?” It means more and more American families forced to choose between the mortgage and health care bills. It means being hospital visit away from certain bankruptcy. And for Mr. Lewis’s clients – business owners – it means not being able to do the right thing for their employees.

Asked about the rate increases we’ve all been hearing so much about, Lewis said:

“I’d say we settled in a range, on our book of business, from a 5 percent reduction to a 50 percent increase. But generally speaking, we were in the low- to mid-teens, and this is where the real challenges begin.”

Lewis then went on to answer questions about what reform would mean for the scores of businesses across the country who are being priced out of insurance because of lack of competition among carriers. He found that employers agree with the goals and urgency of health insurance reform:

“I think most people would acknowledge that there’s a need for healthcare reform, employers continue to be very frustrated. So when they look at what the Obama administration and the Democratic Majority state as their goals to increase access and lower cost and rail at what may be termed oligopolistic behavior of carriers in certain markets, I think employers really buy into that message and have much of that frustration and anger at our lack of solutions.”

Lewis’s conference call followed on the heels of another eyebrow-raising analysis from Wall Street (PDF).

You remember Wellpoint, the massive insurance company behind the 39-percent rate increases in California. Well, according to a recent study by Wall Street investment bank Cowen & Co. finds that “Wellpoint would be a primary beneficiary” if reform fails.

The Washington Post explains that Wellpoint’s business model is focused on the individual and small-group market where most of the egregious rate-hikes and abuses take place. So enacting reform – with its protections against unreasonable rate increases and guarantees that more of your money will go toward care, not profits – would mean that Wellpoint and others like it would have to change their ways. Which, of course, is what reform is all about.

It’s time to get this done.

Dan Pfeiffer is White House Communications Director

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See Also:

• NEWSFLASH: It’s Abortion That’s Going To Kill Healthcare Reform
• Chanos Is Done Shorting Healthcare, After Watching This Administration "Give Up All Its Principles"
• Here’s Something We Can Easily Do That Will Accomplish Way More Than Solving Healthcare