March 26, 2010 / 6:27 PM / 7 years ago

AT&T sees $1 billion healthcare related charge

NEW YORK (Reuters) - AT&T Inc (T.N) said on Friday it would record a $1 billion non-cash charge for the current quarter related to the new U.S. health care reform law, as lawmakers called on the company and three other large employers to testify about expected cost hikes.

AT&T's charge appeared to be the largest in a series of charges announced by U.S. companies this week.

A House Energy and Commerce subcommittee said on Friday it will call on the chief executives of AT&T, Caterpillar (CAT.N), Verizon (VZ.N) and Deere (DE.N) to testify on April 21 about how the reform might adversely affect their ability to provide health insurance.

"The new law is designed to expand coverage and bring down costs, so your assertions are a matter of concern," the subcommittee said in the letters.

AT&T, whose annual revenue is expected to be $124.1 billion this year, said the charge is the result of a provision in the law related to the tax treatment of Medicare subsidies.

As a result of the legislation, the company, which ended 2009 with 282,000 employees, said it will be evaluating prospective changes to the health care benefits it offers to employees at retirees.

Under the health care overhaul large ranks of retirees can no longer deduct from their taxes the subsidies paid by the federal government for retiree drug benefits.

AT&T, the biggest U.S. telephone company, declined to comment beyond its statement filed with the U.S. Securities and Exchange Commission when asked whether the new law would create any more changes beyond the first quarter.

According to reports, Verizon Communications, the second biggest U.S. phone company, told employees that tax burdens under the new law would likely filter down to employees. Verizon declined to comment.

Other companies that announced health care reform related charges include Deere, a maker of farm equipment, which sees a $150 million charge for its current quarter, and Caterpillar, which warned of a $100 million charge.

The congressional letters to the companies said the House Energy and Commerce Committee has made it a top priority to ensure the law is implemented effectively and does not have unintended consequences.

They also said the companies' reports of cost burdens appear to conflict with independent analyses.

The Congressional Budget Office has reported that companies that insure more than 50 employees would see a decrease of up to 3 percent in average premium costs per person by 2016, the letters said.

AT&T shares rose 10 cents to close at $26.74 on the New York Stock Exchange.

Reporting by Sinead Carew in New York with additional reporting by Lisa Richwine and Karey Wutkowski in Washington; Editing by Leslie Gevirtz and Richard Chang

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