EDITOR OF REDSTATE
Delta Airlines and the $100 Million Costs of Obamacare
Republicans in the United States House of Representatives and Senate claim they will vote to defund Obamacare, but they won’t actually fight for it. What they want to fight for is just a delay of the individual mandate. That’s it. But there is so much more that is so much more onerous about Obamacare. Delta Airlines, in a letter it prepared back in June, outlined just how onerous Obamacare would be to the airline.
In the past twenty-four hours, during my radio show in Atlanta, numerous Delta employees called in to tell me Delta is now telling its employees their healthcare will be radically changed because of Obamacare. A handful of them said the June 2013 letter from Delta to the Obama Administration is being circulated among employees.
The letter is stunning. According to Delta, in 2014 Obamacare will cost the company at least $38 million in direct costs and that is only the beginning. With added medical inflation, Delta claims “the cost of providing health care to our employees will increase by nearly $100,000,000 next year.” A $100 million increase thanks in large part to Obamacare and ancillary cost increases derived therefrom. Yes, I have the letter. From the letter:
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.
Delta also notes that because adults can be left on their parents’ insurance until they are 18, Delta is already incurring an additional $14 million per year. The company notes that under Obamacare, “We are required to charge the same for these children as we do for any other children covered by our plan. However, our experience shows that, on average, these children are consuming considerably more health care than other children we cover.”
Because of the individual mandate, Delta estimates more of its employees coming onto insurance who have otherwise declined it. That will increase their costs $14 million too. The company notes that it does not plan to reduce hours for workers to under thirty hours, but is aware that other employers will.
More troubling, Delta notes it designed a specific insurance plan for its pilots. But because of “cadillac tax” rules, Delta is going to have to scrap that plan because, though it meets the needs of Delta’s pilots, it runs afoul of government regulations relating to the extravagance of plans.
My friend George Will, back in 2002, noted that the airline industry historically, “may not have netted a nickel since the Wright brothers. It certainly had net losses 1945-94. After the brief boom of the late 1990s, it was hemorrhaging money even before terrorists attacked the United States through the industry.”
In 2012, Delta had $1 billion in profits, but with a profit margin of less than ten percent. Liberals may say Delta should not then worry about its profits, but a $100 million expense in one line item is significant for any business and more so for one with a low profit margin. Only a few years ago, though, Delta saw net losses of $9 billion. The airline industry is notoriously fickle with very tight margins.
Republicans have an opportunity to shut it all down. But instead, they’ll work with the Democrats to delay the individual mandate while the rest of the machinery of Obamacare keeps on keeping on. You, me, and everyone else will pay the price in higher medical costs, higher airfare, lower wages, and high unemployment.