A Feature, Not a Bug

At some point we'll probably start to realize that all the unintended consequences of Obamacare were actually quite intended. For example, there's this: employers may not want to provide health care going forward:

Internal documents recently reviewed by Fortune, originally requested by Congress, show what the bill's critics predicted, and what its champions dreaded: many large companies are examining a course that was heretofore unthinkable, dumping the health care coverage they provide to their workers in exchange for paying penalty fees to the government.

That would dismantle the employer-based system that has reigned since World War II. It would also seem to contradict President Obama's statements that Americans who like their current plans could keep them. And as we'll see, it would hugely magnify the projected costs for the bill, which controls deficits only by assuming that America's employers would remain the backbone of the nation's health care system.

It's almost sweet that Shawn Tully, a "senior editor at large" from Fortune, would actually believe that President Obama and his allies were actually hoping that employers would continue to handle health care. If they wanted that, they wouldn't have constructed the 2,000+ page Leviathan they did. In fact, they could have left things alone. But that was never the plan. Still, our reporter can't believe it:

Hence, health-care reform risks becoming a victim of unintended consequences. Amazingly, the corporate documents that prove this point became public because of a different set of unintended consequences: they told a story far different than the one the politicians who demanded them expected.

We've said it over and over -- rational people respond to incentives. Anyone who has control over a business has ample reason to behave in a rational manner. And if it is rational, and more cost-effective, to dump health care coverage and face a fine, it's better to face the fine if there's no other real sanction involved.

But let Tully tell you a little more:

In the days after President Obama signed the bill on March 24, a number of companies announced big write downs due to some fiscal changes it ushered in. The legislation eliminated a company's right to deduct the federal retiree drug-benefit subsidy from their corporate taxes. That reduced projected revenue. As a result, AT&T (T, Fortune 500) and Verizon (VZ, Fortune 500) took well-publicized charges of around $1 billion.

The announcements greatly annoyed Representative Henry Waxman, who accused the companies of using the big numbers to exaggerate health care reform's burden on employers. Waxman, chairman of the House Energy and Commerce Committee, demanded that they turn over their confidential memos, and summoned their top executives for hearings.

We talked about that at the time, of course. Oddly enough, Waxman cancelled the hearings rather abruptly. Allow Tully to share the reason:

The request yielded 1,100 pages of documents from four major employers: AT&T, Verizon, Caterpillar and Deere (DE, Fortune 500). No sooner did the Democrats on the Energy Committee read them than they abruptly cancelled the hearings. On April 14, the Committee's majority staff issued a memo stating that the write downs were "proper and in accordance with SEC rules." The committee also stated that the memos took a generally sunny view of the new legislation. The documents, said the Democrats' memo, show that "the overall impact of health reform on large employers could be beneficial."

Nowhere in the five-page report did the majority staff mention that not one, but all four companies, were weighing the costs and benefits of dropping their coverage.

Waxman knew all this. He just didn't want everyone else to know. At least not yet. The primary reason that Obamacare is supposed to be phased in over a number of years is simple -- people won't understand the endgame until it's too late. The plan was to make healthcare requirements so onerous that employers would have a choice -- either pay the premiums and face severe financial hardship in doing so, or offer a half-assed version of healthcare that would offload the costs onto their employees. But there was a better alternative built into the legislation -- employers could avoid a lot of heartburn by simply paying the fine instead. And any officer of a company who takes fiduciary duty seriously would have to consider paying the fine and dropping coverage.

But the voters weren't supposed to know that, at least not yet. From the perspective of the average voter/healthcare recipient, the goal was to make healthcare in the interim so awful that people would be clamoring for single-payer, which would theoretically solve the cost and access problems. Waxman, Obama and the rest of our friends had it all planned out. But that wasn't supposed to happen until, say, 2014 or 2016. And we surely weren't supposed to learn about it in April, 2010.

There's a lot more at the link, most of which won't surprise readers of this feature. Even if you know how this ends, it's worth reading.