Tuesday, March 30, 2010

The Healthcare Follies Continue

Democrats told us that if they passed the health care reform bill, we'd find out what was in it.  It turns out that major companies have found out, and reacted to it.  Unfortnately, their reaction is at odds with Democrats' view of reality...
Even before AT&T Inc. said Friday that it will take a $1 billion charge in the first-quarter because of the new health-care law, the issue was front-and-center with key lawmakers.

Earlier this week, Caterpillar Inc., Deere & Co., and AK Steel Holding Corp. announced their own hefty one-time charges.

Almost immediately, House Energy and Commerce Committee Chairman Henry Waxman of California and Rep. Bart Stupak of Michigan, chairman of the Oversight and Investigations panel, announced plans to hold an April 21 hearing on “claims by Caterpillar, Verizon, and Deere that provisions in the new health care reform law could adversely affect their company’s ability to provide health insurance to their employees. These assertions appear to conflict with independent analyses, which show that the new law will expand coverage and bring down costs.”

The committee wants the companies’ CEOs testify and provide evidence of the law’s projected impact.

The companies have said they are compensating for the expected loss of a tax deduction on tax-free government subsidies they receive when they provide retirees with prescription drug reimbursement under Medicare Part D. The current tax structure won’t change until 2013, but company executives say they’re preparing for the higher costs now.
Dennis the Peasant has some nice points on this...
You see, these companies did not just decide to release press statements disclosing the horrors of Obamacare to a shocked and dismayed citizenry. In fact, they didn't release press statements at all. What they did was what was required of them by law:

They filed an 8-K with the S.E.C.

For those of you who are unfamiliar with financial regulation, the law requires all publicly held companies to file a Form 8-K with the S.E.C. when said company becomes aware of either a (1) unscheduled material event, or (2) a company change. As a matter of fact, that's what a Form 8-K is called, a "Report of unscheduled material events or corporate changes". And according to the law, when a company becomes aware of an unscheduled event that will probably have a material impact on the earnings or operations, it must file a Form 8-K with the S.E.C. or risk sanction.

That's exactly what AT&T, Caterpillar, Deere & Co., Verizon, AK Steel and others did: They complied with the law. Financial regulatory law. You know, the sort financial regulatory law Democrats are saying they are real keen to strengthen. Anybody think the irony of Henry Waxman's stooge Bart Stupak bitching out Randall Stephenson for doing what financial regulatory law requires is going to be lost on the Congressional Republicans in the room?

Beyond that, you can bet the staffers working for Democratic Representatives sitting on the Energy and Commerce committee, and especially those involved with Energy and Commerce's investigation subcommittee are, at this very moment, completely horrified. They're quite aware, even if Waxman isn't, that because each of the companies named above have filed a Form 8-K and booked losses related to the event described in the Form 8-K, those companies have documentation that has been labored over by tax and accounting professionals for months; documentation that was then reviewed thoroughly by the company's independent auditors. Everyone that was involved is a damn site better than any of the staffers Waxman and Congressional Democrats will have available for investigation.

What Waxman is now laying himself open to is the charge that he is attempting to force these companies to manipulate their financial data to suit the political aims of President Obama and Congressional Democrats. Since there is absolutely no hope of investigative committee staffers finding evidence that AT&T's (or others') calculations are materially incorrect, Waxman simply comes across attempting to force the managements of publicly held companies to circumvent the law.

This is the part the Democratic/liberal/progessive political classes and commentariat doesn't get: Once Obamacare became the law of the land, its effects are no longer solely a matter of politics. Now there are real-world effects, and many of those real-world effects will not go away when political pressure is applied. The next week will be filled with more companies filing more 8-Ks describing just how much "health care reform" is going to cost them, and by implication, their employees, and there is nothing that Henry Waxman can threaten that will make those companies stop.
I am reasonably certain (based on my own time doing corporate work) that the 8-Ks were vetted to hell and back, and no in-house attorney, outside counsel, or auditor with half a brain would allow a major company to file an 8-K solely to make a political point. I am guessing that the companies could have waited to file, but that the decision to file now may help them fend off future shareholder lawsuits ginned up by plaitiffs' attorneys and keep the SEC off thier backs. These companies are filing their 8-Ks and will have more than adequate documentation to back them up; what will happen now is that staffers for Waxman and Stupak (who are smart) will now search for otherwise innocuous statements in emails and documents that can be turned into something sinister. Waxman and Stupak will breathlessly claim that these statements seem to prove these companies are guilty of trying to undermine the brilliance of Obamacare and even more corrupt then... um, Congress.

This is an awfully stupid whipsaw that Democrats are constructing -- they want further disclosure to be required by financial regulatory reform, but even under the current law (that they view as inadequate) they want that disclosure only insofar as it accords with their understanding of reality.  If the disclosure doesn't agree with what the Democrats want, then they don't want it, although they probably won't jump forward to defend the company if it gets hit by the SEC and shareholder lawsuits.  It's also more troubling than they realize --  Congress is essentially interested in substituting its judgment for a company's business judgment, solely because the company's business judgment impacts Congress' political priorities.  Congress can't even draft legislation appropriately, which is its job; now they want to handle financial and legal judgment calls at major businesses?

That's just the practical side of it.  On the political theory side of it, such actions -- Congress calling on the carpet those who, in trying to comply with the complex regulatory state designed in part by Congress, dared to make announcements that disagree with Congress' view -- could be construed as an attempt to chill dissent.  Other companies may choose to wait to make their disclosures, at least until January, when Henry Waxman will (hopefully) no longer be the chairman of a House committee.  Maybe he'll call for an investigation into that as well.

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