The so-called “fiscal cliff” facing America’s tax structure at the end of this year is like The Plague or a “financial superstorm,” Aetna’s CEO Mark T. Bertolini said Wednesday morning on CNBC’s Squawk Box.
He also threatened layoffs next year.
The “fiscal cliff” refers to a series of tax breaks set to expire Dec. 31 and new taxes starting in January related to federal health care reform. Additionally, federal spending cuts are scheduled to take effect Jan. 1, which would slash government spending. At the heart of the issue is the federal government’s budget and growing debt as elected officials fail to agree on a solution.
“It’s a bit like, you know, the 15th century castle gates closing during The Plague, if you think about it,” Bertolini said on CNBC’s Squawk Box. “We’re going to hope it goes by, and when it goes by, we’ll then re-open the coffers and the food stores. We don’t have the option of waiting any longer.”
“It is a superstorm, a financial superstorm that we need to get our head around and act in the same way as we acted with this last hurricane,” Bertolini said referring to bipartisan cooperation.
Aetna is planning for America to go over the fiscal cliff, Bertolini told Squawk Box. The Hartford-based health insurer is in “contingency” mode because he doesn’t know what the macroecomonic picture will be.
“What more contingency means is, I pull back on capital investment, which we’ve done – everything’s gated – and we layoff people,” Bertolini said. “So, jobs go out the window. And, so, the American people get hurt in this process.”
If the Gross Domestic Product declines in the first quarter, and unemployment increases, Bertolini said there could be a spike in utilization of medical services as people try to go to the doctor before they lose their employer-based health care.
So, does that definitely mean layoffs next year if tax cuts are rolled back and new taxes related to health-care reform are introduced?
“We have a head count holding flat, assuming we don’t go over the fiscal cliff,” Bertolini said on Squawk Box. “If we go over the fiscal cliff, I have to react, and, so, I know where I need to pull back.”
“In the end analysis, the top line has to grow,” he said of revenue. “If the top line doesn’t grow, you’ve got to do something about expenses. … Our goal is to hold head count flat.”
Bertolini is one of almost 90 corporate CEOs who are members of a Fiscal Leadership Council to the Campaign to Fix the Debt. The group says it is a nonpartisan movement to “put America on a better fiscal and economic path.”
At the beginning of the CNBC segment, Bertolini was asked whether anything has changed at Aetna related to the company preparing for federal health care reform, the Affordable Care Act.
“Today is the same as it was yesterday,” Bertolini said. “We just keep moving forward and implementing this Act. I think the bigger issue we’ll face is what happens with the fiscal cliff. That will have more to do with the subsidies and the taxes associated with this bill and our ability to move forward with full implementation. I think that’s where the bottom line is going to hit as we go through the fiscal-cliff discussions.”