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 to 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.
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 a health insurer CEO's salary.
Doggett pointed out that the pay of Aetna's (AET) CEO is more than $17 million, and Cigna's (CI) CEO's 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, R-NY, said "I don't think this provision is unjustifiable, and I think it's morally reprehensible."
The CEO of UnitedHealth (UNH), 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."
