The Corner

Delta’s Health-Care Costs to Rise $100M in 2014, In Part Because of Obamacare

Delta Airlines has circulated a letter among its employees from one of its top human-resources officers explaining that the company’s health-care costs will increase by approximately $100 million, blaming Obamacare for much of the increase (though not the entirety, as Erick Erickson and many have said). RedState obtained the original missive, but Avik Roy has an excellent explanation of the various issues it lays out over at his Forbes blog. The letter explains pretty clearly one of the larger single costs due to the president’s new law:

The ACA requires large employers to pay an annual fee of $63 per covered participant in 2014. For Delta’s roughly 160,000 enrolled active and retired employees and their family members, this represents more than $10 million added to the cost of providing health care next year. As we discussed, this fee, which is meant to help stabilize the state exchanges as they get started, provides absolutely zero direct benefit to our participants. It is, essentially, a direct subsidy from us and our employees to those who participate in the exchanges.

There are other issues: For one, like many large corporations (such as UPS) Delta is facing millions of dollars in costs because of employees adding children up to age 26 to their plans, as Obamacare permits (previously the limit was generally 21). Delta estimates the tab for that will be $14 million. Because of the individual mandate, thousands of more employees who currently don’t have insurance with Delta will now start buying it from the company, forcing the firm to make expensive employer contributions to their health care – that’s another $14 million.

That’s $38 million in added costs, directly from Obamacare, out of the $100 million jump next year, and there are some other provisions with unclear costs. For instance, Delta self-insures, meaning that the company collects premiums from its employees and spends a lot of its own money to pay for claims costs for all of its employees, acting essentially as its own insurance company. As Avik explains, corporations who do this can save on costs by offering coverage that isn’t in compliance with certain expensive state regulations that apply to plans offered by insurance companies; Obamacare will continue to allow some exemptions, but will apply new regulations to the self-insured plans as well, increasing costs.

In one sense, $100 million is not a huge bump in personnel costs for a company that made $36.7 billion last year — but theairline made only $1 billion in profit, so this is a serious concern for its bottom line.

Patrick Brennan — Patrick Brennan is a writer and policy analyst based in Washington, D.C. He was Director of Digital Content for Marco Rubio's presidential campaign, writing op-eds, policy content, and leading the ...

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