90 Miles From Tyranny : Obamacare Will Cost Delta Airlines $100 Million Next Year

Saturday, August 24, 2013

Obamacare Will Cost Delta Airlines $100 Million Next Year

Delta airlines says that the health law will cost the company $38 million directly, and nearly $100 million
when all the additional costs are factored in.

In a letter signed by Robert Knight, Delta’s Senior Vice President for Government Affairs, the company says that the company will absorb some of those costs, but will also end up sharing some of them with employees. Ultimately, Knight writes, Obamacare “will result in increasing costs, for both companies and our employees, and will also reduce the benefits provided.”

The bulk of the letter, first posted by Erick Erickson at Redstate, details the specific provisions that Delta expects to add to the company’s costs. Those include:

A reinsurance fee of $63 per covered individual, which makes family coverage more expensive and which the company estimates will cost about $10 million next year.
Coverage for dependents up to age 26, which results in a “permanent increase in costs of about $14 million a year.”
The individual mandate, which Delta expects will result in some employees who currently turn down employer coverage deciding to take it rather than pay a penalty—which will cost the airline an additional $14 million.
But Delta can afford it, can’t they? The company’s profits were up 18 percent in 2012, when it netted about $1 billion on $36.7 billion in revenue. Compared to that, $100 million is just a drop in the bucket, right?

That’s one way to look at it. Here’s another: Delta is, at least for the moment, better positioned to handle these sorts of costs than many, perhaps even most companies. It’s a huge corporation with billions in revenue, and the $100 million cost represents a relatively small part of its net revenue.

And it’s still planning to reduce benefits for workers.

So consider how all the smaller companies that don’t have Delta’s cash cushion or reasonably strong annual margins are likely to react. And think about what might happen a few years down the road if Delta’s profits—which were losses just a few years ago—don’t hold up. The costs imposed by Obamacare won’t just be shrugged off, or eaten as part of the normal cost of doing business. They won't go unnoticed by execs, or unfelt by workers. They will have an impact, somehow, on employers and their employees, on the benefits they provide, and the coverage they receive.



Anonymous said...

Your "another way to look at it" was right on the money. That kind of rationale is what needs to be used and discussed as we present the case against Obamacare to the public. Nicely done!

juvat said...

Another way to look at it is the effect of the rolling strikes by the UAW on American Automakers in the 60's and 70's. The automakers were making significant profits and instead of striking for wages, the unions struck for benefits, an entitlement. When the Japanese automobile makers finally recovered from WWII and started making quality vehicles, American profits went down, but the benefit requirement continued, thereby reducing profits further. Less money to reinvest, retool and remodel. Hence we got those god-awful K cars in the 80s. Low quality vehicles led to lower sales, led to lower income, but the benefits continued......
Flying fighters, this was called a death spiral. It might take a while but unless you did something drastic, you were going to hit the ground. Automakers were not allowed to cut benefits, thank you Barry O, and so we now have that gaping canker sore known as Detroit. This may be oversimplified somewhat, but essentially correct.

juvat said...
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