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Is Healthcare reform The End Of Employer Medical Insurance coverage?

medical insurance costs in the USOne of the biggest questions surrounding healthcare reform has been, "how would corporations react to the new bill". A recent CNN.com article maybe shedding some light on that question. The article reports some fortune 500 companies are considering the possibility of dropping their employee medical insurance plans.

Before the bill was passed, congress had requested internal documents related to the employee benefit plans of some of the largest employers in the US, companies such as AT&T and Deere. Upon an examination of those documents by Fortune, it appears that the greatest fear of the bill's supporters maybe coming true. Many large employers are examining the savings they would realize by dropping the company medical insurance plan and paying the penalties required by the healthcare reform bill, for not carrying an employee health plan. If employers take this course, America's employer based healthcare system would collapse and the cost of the bill would be hugely magnified.

Caterpillar and AT&T actually spell out the cost differences: Caterpillar did its estimate in November, when the most likely legislation would have imposed an 8% payroll tax on companies that do not provide medical insurance coverage. Even with that immense penalty, Caterpillar stated that it could shave $25 million a year, or almost 10% from its bill. Now, because the $2,000 is far lower than 8%, it could reduce its bill by over 70%, by Fortune's estimate.

AT&T revealed that it spends $2.4 billion a year on medical insurance coverage for its almost 300,000 active employees. The penalties that AT&T would have to pay if they decided to stop providing medical insurance to it's employee's would be $600 million.

What does it mean for health care reform if the employer-sponsored regime collapses? By Fortune's reckoning, each person who's dropped would cost the government an average of around $2,100 after deducting the extra taxes collected on their additional pay (employers dropping medical insurance would likely give their employees pay raises to compensate for the lost of benefits). So if 50% of people covered by company plans get dumped, federal health care costs will rise by $160 billion a year in 2016, in addition to the $93 billion in subsidies already forecast by the CBO.

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