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Health Care Reform, as currently proposed, would expand access to health care to millions of Americans
and attempts to strengthen the health care system. However, Verizon and other large employers are
concerned about provisions that will have a negative financial impact on large employers and/or their
employees. Additionally, there are provisions that will cause additional administrative complexity and cost
and ERISA erosion. Of particular concern is that large employers, like Verizon, that offer health care
coverage would be required to be responsible for paying for the cost of general reform through increased
employer taxes and while continuing to pay for health care coverage that may go up in cost due to shifting
of increased taxes/fees from the provider and insurance industries to employers/employees.
Below is a list of the provisions that would have significant impact on employer provided health care
coverage.
- Many of characterized this tax as a 'pass through' to the consumer (in Verizon's case employees and
retirees); however, there will be significant legal and bargaining risks to overcome for this to be the
case for Verizon
• The elimination of this deduction creates a material one-time after-tax accounting loss at the moment of
enactment to Verizon of approximately $1.2B
• The RDS favorable tax treatment was initiated to provide incentives for employers to continue Medicare
prescription drug coverage after Medicare Part D was enacted
- Eliminating the deduction, coupled with the proposed change to phase out the "donut hole," will result
in lower subsidies (higher costs to employers) and lead many employers to discontinue coverage,
moving retirees to the government sponsored plan
- There will be significant legal and bargaining risks if Verizon discontinues coverage for certain groups
of retirees
Grandfathered Plans
• In the original health care reform proposals, the intent of this provision was to allow individuals to keep
the plans they have today CGrandfathered Plans'); however, other stipulations have been added
• The President's proposal would impose certain requirements on grandfathered employer plans (effective
dates vary from 6 months after enactment of bill to 2018); those with the greatest impact to employers
include:
- Extend coverage for adult dependents up to age 26; if not a tax dependent then income will be
imputed (effective 6 months after enactment)
- Prohibit plans from imposing annual and lifetime limits (effective 2014)
- Require plans to cover preventive services with no cost sharing (effective 2018)
Changes to Medicare
• There are proposed changes Medicare beneficiaries and employer plans with both positive and negative
impacts
- Creation of an independent Medicare Advisory Board tasked with presenting their best ideas to
improve the quality of Medicare and reduce costs for Medicare beneficiaries
- Increase in preventive care services by waiving co pays for most preventive care services and fully
covering an annual well ness visit and personalized prevention plans
- Phasing out of the "donut hole" by 2020 provides more comprehensive coverage for Medicare-eligible
individuals; however, it makes it harder for employer to qualify for RDS (not an immediate issue for
Verizon due to very rich plan designs and ability to aggregate populations)
• The program creates a temporary federal program with $58 in funding to help offset the cost of health
care claims
• The proposal projects a savings up to $1,200 for every family enrolled; however, like 'cash for clunkers'
the limited amount of funds available will probably be spent quickly with no material savings for Verizon.
- To avoid additional costs and regulations, employers may consider exiting the employer health
market and send employees to the Exchanges