Since Congress passed the health care reform bill on March 21st, we have seen numerous companies announce that they will take charges to earnings. The reason for the charges stems from one aspect of the legislation that eliminates deductions for tax-free subsidies companies receive from the government for providing prescription-drug benefits to retirees. Due to the material and quantifiable impact that the bill will have on their business and financial results, the companies are required by law to disclose it. By not doing so, they would open themselves up to lawsuits in the future.
In the midst of these announcements some members of Congress are claiming that the companies are being irresponsible by announcing these charges, and late last week Congressman Henry Waxman called the CEOs of each of these companies to appear at a Congressional hearing on April 21st.
Regardless of whose side you take in the debate (companies vs Congress), it is apparent that Congressman Waxman is probably going to need a bigger room! As shown in the table above, since the passage of the bill less than two weeks ago, at least fourteen companies have announced charges totalling at least $1.6 bln (Verizon (NYSE:VZ) has announced that the bill will impact earnings but has yet to determine an exact amount). In Washington a number like $1.6 billion may sound like a drop in the ocean, but in the real world it adds up.