Financial Resource

When healthcare reform legislation finally passed, several major corporations quickly moved to modify their earnings report. The claim from AT&T, Caterpillar, and others was that a provision in the law would increase their costs and hurt their profits.

Specifically, their concerns involves the expiration of an existing tax break. That tax break has allowed companies to avoid paying taxes on the expense of prescription drug coverage for their retirees.

Why was the tax benefit revoked? It was a matter of raising sorely needed money to pay for the bill. Its impact on the budget deficit has been heavily debated, and the .5 billion it is predicted to bring in over the next decade will help make a dent in its nearly trillion budget.

At the time, some Democrats criticized the companies’ boards for being so hasty. They were warning investors of the potentially negative impact affordable health insurance reform would have on their earnings, possibly putting the proposals in a bad light through exaggeration. Therefore, Representatives Henry Waxman and Bart Stupak followed the request of the commerce secretary and launched an investigation of the issue.

The results of the House’s Energy and Commerce Committee’s poring over hundreds of pages of data proved Verizon, John Deere, and other companies right: they were correct under generally accepted accounting principles (GAAP) to inform their shareholders of the one-time earnings write-downs through filings with the Security and Exchange Commission. After their decision, Stupak and Waxman canceled a meeting in which they were scheduled to grill executives.

Over 40 companies have been impacted by the law, to the tune of .4 billion worth of write-offs since the bill was signed by President Obama in late March. Those write-offs are also partially the result of provisions that will tax high-cost health insurance plans and allow adult children to remain on their parents’ coverage until the age of 26.

(Image: Photos8.com)

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