Should Health Insurance Plan Executive Tax Deductions End?
Posted: Wednesday, December 09, 2009
by Yamileth Medina
VitalOne Health
With the public option looking like a non-starter in the Senate, Democrats are looking for other ways to lower the cost of a health insurance plan for the average American. Several of them have proposed that the tax exemption health insurance companies currently enjoy for their executives' salary be reduced. Presumably, this would be a form of the stricter regulation most Democratic senators desire. Of course, this plan is subject to skepticism. Some may feel that this will amount to another so-called "pay czar", much like the person currently in charge of executive compensation for certain automobile and financial companies. Such governmental interference in capping salaries may prevent insurers from attracting the best businesspeople to work with their health insurance plan offerings. Those bright minds may choose to seek employment in other industries instead. America's Health Insurance Plans, the leading health insurance lobbyist group, has not commented on the idea, though they are likely to have similar sentiments.
The actual scenario, however, is not quite as bleak. First, the legislation is clear in that it does not limit health insurance executive pay itself in any way whatsoever. Insurers can continue paying whatever salary the market will bear; they will just be taxed on more of it. While that can have indirect impact on pay scales, it does not mandate any changes. Moreover, this proposal only applies to those companies participating in Medicare. It can be argued that if a firm accepts money from the federal government, it has some strings attached. After all, bailouts affect all taxpayers, not just shareholders. Most companies that work with the government-run Medicare program for senior citizens offer at least one Medicare Advantage health insurance plan. These supplement plans are usually quite profitable, and subsidies help draw more customers towards these private plans.
Cost is of central importance when it comes to the healthcare reform debate. According to Lincoln, her proposal would make slightly over $650 million over a decade. That would go part of the way towards keeping the Medicare health insurance plan solvent. It would also help the odds of reform passing through Congress, because it will decrease the overall bill's impact on the nation's budget deficit. Such an amendment may decrease the necessity of other unpopular cuts, giving wary senators some breathing room to support the bill. The fate of Lincoln's amendment will most likely be known after its inclusion is considered this weekend.
(Image: Alan Cleaver under CC 2.0)
Yamileth Medina is an up and coming expert on Health Insurance and Healthcare Reform. She aims to help people realize that they can find a health insurance plan right now while waiting for a public option, if it ever gets passed. Yamileth lives in Miami, FL.
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