In the fine print of Trumpcare: A huge payday for health insurance companies


The GOP bill provides a monster payoff to companies like UnitedHealth, which has annual profits equal to Somalia's gross national product.

There's gold buried in the 123 pages of the GOP bill repealing the Affordable Care Act.  

Located halfway through the dense read is six lines that would nix Obamacare's limit on corporate tax deductions for executive pay.   

The story begins in 1993. Federal lawmakers revised the tax code capping the deduction at $1 million for what corporations pay their execs. But a gaping loophole accompanied the change: an exception for so-called "performance pay." The escape clause said corporations could deem the stock rewards they give execs "performance-based."

In other words, anything above the $1 million ceiling could be deducted by the likes of UnitedHealth as a basic business expense.  

Starting in 2013, the Affordable Care Act brought the practice to a halt. The idea behind imposing a hard $500,000 cap on the tax deduction of health insurance executive pay was simple. Since insurers would be the profiteers of Obamacare, they should pay more of the freight.

Due to astounding executive pay, according to the Institute for Policy Studies, the nonprofit research think tank, the new limit generated at least $72 million in additional tax revenues from the nation's ten largest publicly held health insurance companies in 2013.

"These 10 corporations owed an extra $1.3 million in taxes per executive," the Institute concluded.

But for reasons unexplained, the new Trumpcare plan completely removes the deduction cap.  

Here's how it would hook up Minnesota's own insurance giant, UnitedHealth:

CEO Stephen Hemsley's 2014 total compensation was $66 million, of which only $1.3 million was salary. Almost all of the remaining haul fell under the performance-based umbrella, according to the Institute's Sarah Anderson. 

If Capitol Hill Republicans have their way, United would get a roughly $64 million tax break on Hemsley's wages alone. This for a company with annual profits around $6 billion, which is greater than Somalia's GNP.

"I still have a hard time understanding their opposition to such a minor reform," Andersen says. "It would appear to be an ideological aversion that government should not be doing anything to interfere with the amount someone gets paid in America.

"It's a case of politicians being disconnected with ordinary people. Public outrage with executive pay could have political costs if the rollback is part of their intended reform."


Sponsor Content