Fortune magazine reported that many large companies are examining the possibility of dumping the health care coverage they provide to their employees in exchange for paying penalty fees to the government. This is in reaction to new health care laws that radically changed the subsidies, penalties, and taxes.

Such a move would dismantle the employer-based health care system that existed in the United States since World War II, as the new laws would magnify the projected costs of health care. This is because it only controls deficits by assuming that American employers would remain the back bone of the country’s health care system.

The report was based on documents recently reviewed by Fortune, which were originally requested by the Congress.

According to the documents, a number of companies announced big write downs because of some fiscal changes the new health care law ushered in. The legislation removed the company’s right to deduct the federal drug-benefit subsidy from their corporate taxes, which would in turn reduce projected revenue.

These companies include AT&T, Verizon, Caterpillar, and Deere. AT&T produced a presentation entitled “Medical Cost versus No Coverage Penalty,” while Verizon-through its consulting firm Hewitt Resources-said that proposed penalties on companies that do not provide health care are modest when compared to the average cost of health care. It even suggested to its employees to consider “exiting the health care market” and apply through state-run exchanges.

As a consequence of dropping the employer health care system, each uninsured employee would cost the government an average of around US$21,000 after deducting the extra taxes. If 50% of employees get dumped, for instance, federal health care costs would rise by $160 billion a year in 2016, not to mention the $93 billion in subsidies.

Source:  CNNMoney.com