There’s a hefty tax break for heath insurance companies under the new Republican health care reform legislation that cold translate into higher pay for top executives.
The bill would roll back a provision of the 2010 Obamacare law that placed a $500,000 limit on deductions for each executive’s compensation, according to a summary from the staff of the House Ways and Means committee
Five major insurers paid their CEO’s $73 million in 2015, the most recent year for which pay has been reported. Only $2.5 million of that was deductible under Obamacare tax laws. But more than $70 million of that would be deductible under the proposed Republican legislation.
While companies in other industries can typically only deduct executive salaries of up to $1 million, there is virtually no limit on deductions for bonuses. Since the overwhelming majority of executive compensation comes in the form of performance-based bonuses, companies can deduct the overwhelming majority of it as a business expense.
The deductions don’t affect the executives’ individual tax bill, just the company’s. But allowing bigger deductions on executive pay could give companies an incentive to hike that pay, since some of it would be made up for by the lower taxes.
Top executives across the health insurance industry are paid well above current $500,000 deduction limit. Aetna CEO Mark Bertolini received $17.3 million in 2015, the most recent year for which compensation has been reported. Cigna CEO David Cordani made the same amount. UnitedHealth CEO Stephen Hemsley had total compensation of $14.5 million, while Anthem CEO Joseph Swedish received $13.6 million. Humana CEO Bruce Broussard received $10.3 million.
— CNNMoney’s Tami Luhby contributed to this report.