Health and Science

Outrage over $400 million tax break for health insurance executives under GOP Obamacare replacement plan

Rep. Duffy: Expect 'chatter' on both sides of the aisle on GOP's health care plan
Rep. Duffy: Expect 'chatter' on both sides of the aisle on GOP's health care plan

Democrats on Wednesday broadly blasted a proposed Obamacare replacement bill after learning the federal government would lose about $400 million in lost tax revenue over the next decade due to a sweet break for health insurers.

Rep. Sander Levin, D-Mich., said that the tax break related to executive pay underscores the fact that the Republican replacement bill is "the beginning of a huge giveaway to the very, very wealthy," and the end of insurance coverage for millions of lower-income people.

"We're starting off ... with essentially a giveaway to insurance executives," Levin said.

The proposed tax break, buried in cryptic language in the Republican plan, would allow health insurers to more fully deduct the value of their executives' compensation on their taxes. That compensation can be as high as tens of millions of dollars, in the case of CEOs of insurers.

Those deductions currently are sharply limited by the Affordable Care Act, which caps at a maximum of $500,000 the amount of an individual executive's compensation that an insurer could deduct as a business expense. The cap applies to any executive, not just to CEOs.

Health care battle begins on Capitol Hill
Health care battle begins on Capitol Hill

Thomas Barthold, chief of staff for the Joint Committee on Taxation, revealed the $400 million lost tax revenue estimate during the first day of review of the Obamacare replacement bill by the House Ways and Means Committee.

Barthold said that would be the total amount lost through 2026 if the bill became law this year.

If the bill is passed, Barthold said health insurers would be able to deduct up to $1 million of an individual executive's salary on their taxes, just like other types of U.S. companies.

But Rep. Lloyd Doggett, D-Texas, noted that the $1 million deduction cap only is on salary. Executive compensation that includes "performance pay" can, and routinely does, significantly exceed the amount of the salary for a CEO of a health insurer.

Doggett pointed out that the pay of Aetna's CEO is more than $17 million, and Cigna's chief executive tops $13 million. Most, if not all of their pay, could be written off as business expenses if the Republican bill becomes law.

"It could be $100 million, and it would still be possible" to deduct the full CEO compensation?Doggett asked.

Barthold answered, "It would be possible."

Committee member Rep. Brian Higgins, D-N.Y., said, "I don't think this provision is unjustifiable, and I think it's morally reprehensible."

The CEO of UnitedHealth, Higgins pointed out, alone made $66 million last year.

"We're sitting here talking about giving big insurance companies a tax break on the exorbitant compensation to pay their executives?" Higgins said. "We should repeal this provision and replace it with an admonishment to the insurance companies to get your salaries in line with reality."

That provision, however, represents just a small fraction of the approximately $600 billion in revenue it is estimated the government would lose if the GOP Obamacare replacement plan was implemented. Much of those costs would come from the repeal of ACA-related taxes, which disproportionately affect wealthier Americans.

"So, essentially, what we have here to kick off ... is a beginning of a huge giveaway to the very, very wealthy, a huge giveaway, and the silence from the other side I would think indicates deep embarrassment, if possible," Levin said, referring to Republicans on the committee.

"Six hundred billion, with the vast majority going to wealthy families. That describes so vividly the mistake with this bill, and will emphasize those who are going to lose their benefits and their insurance coverage, millions and millions, while billions are going to the very few," Levin said. "That's really what this all about."

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