Government Health Care Bill will cost AT&T $1 billion

One of the many unimagined costs of the health care bill. How many fewer employees will this mean?

AT&T Inc. will book $1 billion in first-quarter costs related to the health-care law signed this week by President Barack Obama, the most of any U.S. company so far.
A change in the tax treatment of Medicare subsidies triggered the non-cash expense, and the company will consider changes to the benefits it offers current and retired workers, Dallas-based AT&T said today in a regulatory filing.
AT&T, the biggest U.S. phone company, joins Caterpillar Inc., AK Steel Holding Corp. and 3M Co. in recording non-cash expenses against earnings as a result of the law. Health-care costs may shave as much as $14 billion from U.S. corporate profits, according to an estimate by benefits consulting firm Towers Watson. AT&T employed about 281,000 people as of the end of January.
“Companies like AT&T, that have large employee bases, are going to have higher health-care costs and, therefore, lower earnings unless they can negotiate something or offer less to their employees,” said Chris Larsen, an analyst at Piper Jaffray & Co. in New York, who rates AT&T shares “overweight” and doesn’t own any himself. . . .

UPDATE: More announcements.

3M sees 1Q charge of $85M-$90M for health reform
(AP) – 3 days ago
NEW YORK — 3M Co., which makes a myriad of products including Post-Its and Scotch Tape, said Friday it expects to take a one-time noncash charge of $85 million to $90 million due to changes in tax deductions relating to the newly enacted health care law.
3M, which is based in Maplewood, Minn., is one of a number of major companies that have had to take a charge on their books to account for a change in the tax treatment of Medicare Part D reimbursements in the future.
The charge is equivalent to 12 cents per share. The company's earnings forecast for this year, which it released in January, did not include the impact of the change.
Earlier this week, AK Steel Corp., Caterpillar Inc., Deere & Co. and Valero Energy announced similar accounting charges, saying the health care law that President Barack Obama signed Tuesday will raise their expenses. . . .

Prudential $100 million
Valero Energy $15 to $20 million.

National Public Radio provides a lame defense.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: These look like scary numbers: $1 billion at AT&T, $150 million at John Deere, $100 million at Caterpillar, $85 to $90 million at 3M and $31 million at AK Steel. Critics of the new health care law say these numbers prove it will hurt business and the economy. But as Chris Cornett of Credit Suisse explains, that argument fails to put the numbers into perspective.

CHRISTOPHER CORNETT, ANALYST, CREDIT SUISSE: Some of the numbers that have come out have been pretty eye popping, right? But what you have to understand is that what the accounting rules are forcing these companies to do is take cash costs that are occurring in the future, well out into the future and cram them into the current quarter. Now that has the effect of coming up with a large number, but that number doesn't represent the cost this period. . . .

The problem here is the direction of the effect.



Blogger Unknown said...

More unemployment means less money to IRS. Less spending means less sales taxes paid to local governments. Reductions in share prices and dividends add to the problems. This ripple effect is so obvious to those of us who have been objecting to this foolishness.

And yet there are many who disbelieve the effects, and who are so anti-business that they can't be made to understand that they are at the same time hurting themselves, their families and their friends by supporting it.

3/28/2010 10:33 AM  

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