* President Obama's healthcare overhaul now one year old
* Law has benefits, drawbacks for businesses
* Gone is a double subsidy on certain drug expenses
* But business now rewarded for insuring early retirees
By James B. Kelleher
CHICAGO, March 25 When President Barack Obama
signed his healthcare overhaul into law a year ago, some U.S.
companies were quick to flag -- and write down -- the millions
of dollars they stood to lose as a result of one aspect of the
A year later, data from the Department of Health and Human
Services shows the business community is one of the biggest
beneficiaries of a separate provision of the overhaul, which
provides billions of dollars in assistance to employers that
maintain medical coverage for early retirees.
Hundreds of U.S. companies -- including some that took
writedowns last year that critics cited as proof of the new
law's burden on business -- are participating in the program,
which has paid out $530 million in the first seven months and
is authorized to spend as much as $5 billion through 2014.
But while companies were quick to bemoan a potential
headwind created by the overhaul, which eliminated a double
subsidy they had enjoyed on certain drug expenses, no one seems
keen to alert shareholders to the tailwind the companies are
enjoying thanks to another aspect of the law.
The program, known as the Early Retiree Reinsurance
Program, was designed to encourage health-plan sponsors --
companies, labor unions, nonprofits and state and local
governments -- to continue to provide coverage to employees who
retire before they qualify for Medicare, the government
healthcare program for people aged 65 and over.
Without coverage from their former plans, experts say these
people often cannot get insurance on their own because of their
age and pre-existing conditions.
In the past, private employers were often willing to pay
for such insurance as a carrot to encourage headcount
reductions through attrition rather than layoffs.
But in recent years, fewer did because the annual costs per
covered person began to rise to $20,000, $30,000 or more. As a
result, "early retirees are among the groups hurt the most by
the current health system," said Nancy Metcalf at Consumer
Reports, "and anything that helps them hold on to coverage
until 2014 is helpful."
Under the ERRP program, U.S. taxpayers now pay 80 percent
of the outlays associated with higher-cost early retirees,
those who cost their former employers between $15,000 and
$90,000 a year in insurance premiums and other
The plan is scheduled to sunset in 2014, when the health
insurance exchanges created by the Obama law are scheduled to
open, providing affordable insurance to everyone. But in the
four years ERRP is around, it can put as much as $240,000 per
early retiree back in the pocket of a company.
"Every extra dollar that employers save on healthcare is a
dollar they can spend on hiring new workers, innovating, and
investing in their future," said Richard Popper, a director at
HHS's Center for Consumer Information and Insurance Oversight.
So far, about one-fifth of the $530 million that was
dispersed in the first seven months of the program has gone to
private U.S. businesses. The actual amounts each company
received are not yet available.
But the official list of companies participating in the
program includes half the members of the Dow Jones industrial
Among the corporate beneficiaries: AT&T (T.N), Caterpillar
Inc (CAT.N) and Deere & Co (DE.N) -- three companies that were
part of the very public writedown wave that followed Obama's
signing of the law last year and the elimination of the double
subsidy regarding retiree drug benefits.
That loophole, created in 2003 with the Medicare
Modernization Act, allowed companies to receive a 28 percent
subsidy from taxpayers to help cover the cost of prescription
drugs for retirees -- without counting the money as income.
And when they spent the money, the companies were allowed
to turn around and get a deduction for it on their taxes --
even though the money was a gift from taxpayers.
The Obama administration saw that as a double subsidy and
eliminated it. So starting in 2013, U.S. companies will only be
able to enjoy the subsidy once, by not having it count as
Reuters contacted AT&T, Caterpillar and Deere this week and
asked them what they had told their shareholders about the
boost their finances are getting from ERRP.
Ken Golden, a spokesman for Deere & Co, did not acknowledge
the request. McCall Butler, a spokeswoman for AT&T, said the
telecommunications giant had "no comment on this."
Bridget Young, a spokeswoman for Caterpillar, said her
company was "still in the process of analyzing our claims
experience to better understand to what degree the
reimbursement will affect Caterpillar. As such, it is too early
for us to comment on how the reimbursement will be allocated."
(Reporting by James Kelleher; Editing by Michele Gershberg and