Be Careful What You Ask For

One of the first rules learned by trial lawyers is this:  when cross-examining an adverse witness at trial, you never ask a question if you don’t know how the witness must answer that question.  You don’t want surprises, and asking one question too many and getting an unexpected answer that is a spear to the chest of your case is the worst surprise of all.

Congress apparently doesn’t know this rule — or at least the House Energy and Commerce Committee didn’t.  As readers of this blog will recall, after the “health care reform” legislation was enacted a number of large American companies changed their financial statements to reflect increased liabilities.  Congress responded by asking the companies to produce all of their confidential internal documents related to the impact of the new law on health care costs.  That was the question that should not have been asked.

As Fortune recently reported, the documents produced by the companies show that the companies are considering getting rid of their employee and retiree health care plans entirely — which is exactly what opponents of the “health care reform” legislation predicted.  It turns out that, for many companies, paying the penalty to the government for not offering health care plans is far less costly than the expense of continuing to offer the plans.  Part of the reason for that imbalance is that the “health care reform” legislation is going to add considerably to the cost of the plans, by requiring coverage for people who are currently uninsured, through operation of the “Cadillac tax” on certain plans, and as a result of the pass-though of new taxes on drug manufacturers, medical device makers, and health insurers.  According to the documents the Committee received, AT&T alone would save nearly $2 billion a year by junking its plan and paying the penalty.  In this highly competitive global economy, where corporations are trying to squeeze every penny, does anyone doubt that at least some American companies will lock in those savings by getting rid of their employee plans?

If corporations do jettison their plans, what will it mean?  For one, it will mean a lot more Americans will need to be covered by plans that are subsidized by the government, which in turn will cause the projected cost of the whole “health care reform” apparatus to skyrocket.  For another, it will mean a lot of people who have Human Resources jobs at American companies will need to dust off their resumes.  If companies don’t need to administer health care plans they won’t need as many HR people as they have now.  And finally, it means there will be a lot of unhappy Americans.  For all of the focus on the “problem of the uninsured” during the debate on the “health care reform” legislation, the fact is that the vast majority of Americans have insurance and are happy with that insurance.  Most of those people are insured through their employers.  If their company plans go poof, and they have to try to find some kind of alternative coverage, they aren’t going to grateful to Congress for that opportunity.

How did the House Energy and Commerce Committee react to these documents?  Predictably, they canceled the hearings and meekly concluded that the companies’ accounting treatment of the increased health care costs was just fine.  That kind of “hear no evil” approach won’t work quite as well when companies start to cancel their employee health care plans, however.

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