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Verizon to Employees: We Expect Our Health-Care Costs to Rise


Earlier today, National Review Online came into possession of an e-mail sent out to Verizon employees following the passage of the Democrats’ health-care bill. In short, Verizon expects the legislation to result in higher costs and potentially reduced benefits for its employees and retirees (relevant sections in bold):

Today, President Obama signed into law the Patient Protection and Affordable Care Act.

This legislation was passed by the Senate on December 24, 2009 and the House of Representatives on March 21, 2010. The House also passed additional legislation intended to make certain changes to this legislation, which is awaiting action in the Senate. 

With these moving parts, it is difficult at this point to gauge the precise impact of this legislation on Verizon, our employees and our retirees.

Verizon offers access to health care coverage to almost 900,000 employees, retirees and their families at a cost of nearly $4 billion a year. As a major purchaser of health care, Verizon has been actively involved in the Health Care Reform debate. Through Chairman and CEO Ivan Seidenberg’s leadership, the Business Roundtable proposed a specific plan on how to achieve much needed reform. The proposal contains five specific principles:

• Preserving the employer-based healthcare system which is governed by the Employee Retiree Income Security Act (ERISA);

• Creating greater consumer value in the healthcare marketplace;

• Providing more affordable health insurance options for all Americans;

• Placing an obligation on all Americans to have health insurance coverage; and

• Offering health coverage and assistance to low-income, uninsured individuals and families.

    There are provisions included in the new law that reflect some, but not all, of Verizon’s priorities. The legislation requires all Americans to have health insurance and provide for assistance to low-income individuals to help them afford coverage. The legislation begins to set up a competitive marketplace to provide more options. However, due to the varying effective dates included in the legislation, we expect that Verizon’s costs will increase in the short-term. These cost increases are primarily driven by two provisions.

    The first is a provision that affects the Medicare Part D subsidy for prescription drug coverage. Because Verizon offers retiree prescription drug coverage today, the government provides a 28 percent subsidy to help offset the financial burden of offering that coverage. The subsidy was intended to help employers continue to offer prescription drug coverage for retirees so that these retirees would not have to use the Government Medicare Part D program. However, changes affecting the Part D subsidy will make it less valuable to employers, like Verizon, and as a result, may have significant implications for both retirees and employers.

    Additionally, there is a provision that taxes high-value health plans expected to begin in 2018. Many of the plans that Verizon offers to employees and retirees are projected to have costs above the thresholds in the legislation and will be subject to the 40 percent excise tax.

    We continue to follow the legislative process closely and will keep you informed as we have more information and have analyzed the impact to our employees, retirees and the company.

    The e-mail provides an interesting look at how companies are preparing for the bill’s implementation. I’ll have more to say about some of its specifics later.


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