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The Healthcare Bill: Potential Effects in the Corporate World

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The recently passed healthcare bill which aims to cover millions of uninsured Americans included several provisions that corporations are feeling the effects of, in spite of the fact that many of these conditions will not be enforced until 2014. Specifically, one stipulation under the new law is that businesses will no longer be able to write off a federal subsidy that covers part of the cost of retiree prescription drug coverage.

CNN Money has reported that many major companies are already attempting to account for this new potential cost and as a result, are taking preemptive actions. For instance, Caterpillar is one of many companies that currently receive tax-free subsidies as an incentive to continue their drug-benefit program. Recently, they took a $100 million charge to earnings in the first quarter. This type of action is a reflection of the potential taxes Caterpillar will have to pay as a result of the change in treatment of the subsidy. Further, there is the potential that this added cost could result in some employers dropping healthcare benefits altogether and instead accepting the penalty that comes along with it.

As the days and months tick by it is very likely that we will see more unintended consequences of the healthcare bill with companies such as Caterpillar acting accordingly. And, although the healthcare reform bill has passed in Congress, action on the regulatory front will likely be the norm in the future as the effects of the healthcare bill are fully felt.

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