Employers United: An Empirical Analysis of Corporate Political Speech in the Wake of the Affordable Care Act
Leonard, Elizabeth Weeks, Scholz, Susan, Alexander, Raquel Meyer, Journal of Corporation Law
I. Introduction II. BACKGROUND A. Brief History of Retiree Drug Plans B. Retiree Drug Subsidy.. C. Post-ACA SEC Disclosures and Congressional Investigation III. SEC REQUIREMENTS AND ACCOUNTING STANDARDS. A. SEC Disclosure Requirements 1. Scheduled Disclosure: Forms 10-K and 10-Q 2. Current Reports: Form 8-K.. B. Generally Accepted Accounting Principles IV. Empirical Methodology A. Sample Identification B. Disclosure Venue C. Company Demographics 1. Industry 2. Size a. Number of Employees b. Assets and Market Capitalization D. Lobbying and Subsequent SEC Disclosure E. Market Nonresponse 1. Prediction Market for ACA Enactment 2. Stock Market Response to ACA Enactment 3. Prediction Market for Supreme Court ACA Decision V. Findings and Implications A. Uniquely Reportable Event B. Government Regulation of Corporate Political Speech VI. Conclusion.
Securities and Exchange Commission (SEC) Form 8-K offers a unique platform for corporate political speech. The requirement that publicly traded firms issue real-time disclosures of material changes to their expected results (1) both requires and allows companies to publicly comment on the financial impact of newly enacted laws. our unique empirical study examines one such disclosure episode that immediately followed the enactment of the Patient Protection and Affordable Care Act (ACA), on March 23, 2010. (2) Following passage of that historic legislation, close to 150 companies wrote off a total of $5 billion against their 2010 earnings, triggered by just one relatively minor provision of the ACA. (3) These write-offs signaled the potentially crippling impact of the entirety of the ACA on employers and the feasibility of continuing to offer employee health insurance plans. Officials in Congress and President Obama's Administration quickly rebuked the firms for unnecessarily alarming the public about the negative effects of the Administration's signature legislation. (4)
The Supreme Court's June 28, 2012 decision in National Federation of Independent Business v. Sebelius, (5) upholding virtually all of the ACA, means that the law is here to stay, barring dramatic changes in the November 2012 elections and repeal of the legislation. Meanwhile, employers continue to express serious concerns about the future of employer-based health insurance. (6) We recognize that SEC-compelled speech may, under certain circumstances, carry a political message and the implications of extending First Amendment protection to those statements. (7) We also recognize that the Supreme Court recently extended even greater solicitude to corporate free speech rights and political participation in Citizens United v. Federal Election Commission. (8) But what we find more troubling is the government's potential to chill otherwise accurate disclosures by damning them as political gamesmanship. (9)
Passage of the ACA did little to quell employers' persistent concerns about escalating health care costs and their ability to continue offering health insurance benefits to retired and active employees. (10) Several provisions of the ACA, including the "Cadillac tax" on high-cost health plans, (11) restrictions on lifetime and annual benefits caps, (12) the extension of dependent child coverage, (13) employer pay-or-play penalties, (14) and new disclosure and reporting requirements, will be potentially very costly for employers. (15) Those changes are against a baseline of ever-increasing costs; in 2013, health care costs are expected to rise 7.5%, which costs employers will either have to absorb, or find ways to reduce or offset. (16)
Although many ACA provisions will impact employers as they are implemented over the next several years, (17) only one, involving a change in tax treatment for federal subsidies to employers, (18) had an immediately reportable impact on firms' financial results in 2010. …