The tax change is designed to help pay for increased health insurance coverage, which is expected to cost the federal government $36 billion this year. The ACA, commonly known as Obamacare, limits health insurance companies to deducting $500,000 per executive as a business expense. For most companies the cap is $1 million, but the deductions can run much higher when compensation is classified as performance pay.
By requiring individual coverage and offering federal subsidies, the ACA boosted the customer base for insurance companies.The Washington-based IPS, a social justice think tank that strives to "challenge concentrated wealth and corporate influence," analyzed SEC filings on executive pay at the nation's 10 largest insurance companies. The group found that the loss of the tax break didn't lead to a reduction in executive pay, but did mean the companies had to pay more taxes.
"In 2013, the 10 health insurance corporations we analyzed paid their top executives a total of nearly $300 million in taxable compensation. If the Affordable Care Act had not been in force last year, these corporations could have claimed as much as 96 percent of this compensation — $289 million — as deductible 'performance' pay," the report says.
The actual increase in tax revenue is greater when smaller companies are factored in and is expected to grow in coming years, the report says.
Authors Sarah Anderson, Sam Pizzigati and Marjorie Elizabeth Wood advocate for expanding the cap: "If the Obamacare executive pay tax provision applied to all major U.S. corporations, not just to health insurers, U.S. taxpayers would save $50 billion over the next 10 years — and deliver a major blow against CEO compensation business as usual."