Morning Read: Will health reform hammer corporate finances?

Highlights of the important and the interesting from the world of healthcare:

Will health reform hammer corporate finances? A casual observer might see recent news that numerous companies will take financial hits from the health reform law and conclude that reform unnecessarily penalizes business. AT&T led the way, saying it’d take a $1 billion charge for the current quarter as a result of reform. Deere & Company soon followed with a $150 million charge, Caterpillar a $100 million charge, and 3M a $90 million charge. The companies attribute their expected financial losses to a previously little-noticed provision of the reform law. That provision reduces the tax deductions for companies with drug coverage for their retired employees, and losing that deduction could cost corporations $14 billion in “future years,” according to a study by a consulting firm. The White House counters that the provision is merely closing a generous loophole, and that the reform law would reduce costs for businesses anyway, by holding down health inflation.

So who’s right? Ezra Klein provides a good breakdown of the story behind the deduction, and it’s pretty apparent that this is a deduction that should’ve never been on the books in the first place. A little background: In 2003, when Republicans passed a law providing prescription drug coverage for Medicare, they worried that the new law could prompt companies to drop their prescription drug coverage and push employees into Medicare’s prescription drug program. To discourage that, Congress gave companies a subsidy of about $1,300 per retiree per year.

Fair enough, but here’s the rub: Not only did the companies get subsidies from the government, but they get to deduct those subsidies from their taxes, which seems like a ridiculous corporate handout. All health reform does is remove the deduction, but it still leaves the subsidy in place. So while the loss of the deduction could hurt companies financially a bit, they should feel lucky they ever received this ill-conceived tax break in the first place.

Insurers thankfully avoid another PR disaster: The dispute over insurance coverage for children with pre-existing conditions seems to have been one of those mini-fires that lasted for about 24 hours, and now insurers have rightly concluded that further damage to their reputations wasn’t worth it. It started when insurers began casting doubts on whether language in the health reform law required them to insure children with pre-existing conditions, as well as the date that provision would take effect. As the New York Times reported, “Insurers agree that if they provide insurance for a child, they must cover pre-existing conditions. But, they say, the law does not require them to write insurance for the child and it does not guarantee the ‘availability of coverage’ for all until 2014.”

Thankfully, insurers have changed their position, possibly after thinking about what a PR nightmare it would create if they didn’t. While it’s true that the law should’ve been written more clearly, and you can fault Congressional Democrats for that, the insurance companies were wise to take the high road on this one, saving their artillery for battles they actually have a chance of winning.

Say hello to an old friend: H1N1’s back, and has stopped in Georgia for a guest appearance. Centers for Disease Control officials say flu-related hospitalizations have been on the rise in the Southeast and Georgia, in particular. Since early February, flu hospitalizations have been higher than at the height of last year’s H1N1 scare in October. That’s got some health officials worried, yet again, that the dreaded “third wave” could be in the offing. H1N1 has infected about 60 million Americans, hospitalizing 265,000 and killing 12,000, the L.A. Times reports.