Prudential will take a $100 million charge to offset healthcare reform

  Prudential has announced that it will take a $100 million charge in the first quarter because of the new healthcare reform law. I have to plead ignorance as to what that term actually means but it seems as if this means they are “cashing in” some of their stocks in an effort to counter-balance some of the effects of the new legislation. Somebody please enlighten me if I am wrong, but that is how I understand this.

  Prudential is claiming that they must do this because they used to receive a tax deduction for healthcare benefits that they provided to retired employees, that tax exemption no longer exists now that Barack Obama has signed the healthcare reform bill into law.

  Prudential is joining what seems to be an ever growing list of companies that have also taken charges to offset the effects of the new healthcare reform law. This list includes; AK Steel Corp., 3M Co., Caterpillar Inc., Deere & Co. and Valero Energy. The healthcare reform law in effect raises the expenses of these companies who provide healthcare insurance to people who no longer work for the companies due to retirement. This new expenditure has to be made up somewhere– when the cost of business goes up the cost of the product goes up– and as usual it will be mainstream Americans that have to make up the difference.

  Apparently, these companies were given this tax break so that they could keep their retired employees on their healthcare plans and in doing so this would keep these former employees off of Medicare. The tax break was being used to save the government Medicare costs.

  With this cut in profits, these companies are looking for ways to offset the losses that the healthcare reform law inflicts on them. According to this article about the $1 billion charge that AT&T is taking, AT&T will start looking at other ways to make up for some of this money. This includes cutting benefits to retirees, including the drug benefit they now receive.

   And all of this is coming from some of the bigger companies in America; how will the new law affect some of the smaller companies? If these large companies are already looking to minimize the effects of the healthcare law, how many benefits will smaller companies with much smaller profits be forced to cut in order to compete?

  The president has repeatedly said that if you like your insurance, you will be able to keep it, but if this is any indication of what is to come in the future than it seems as if this simply is not true. Just ask the AT&T retirees who might lose their drug benefit if they think it is true.

  Again, I am no expert on this– I am just trying to figure out what it all means– but it seems to me that the ramifications of the healthcare reform bill– while they still may not be felt by the majority of the American people for some time– are beginning already.

  An unintended consequence, or is this what the administration intended all along?