The House Republican health-care proposal, the American Health Care Act (H.R. 1628), would modify or repeal in part the Affordable Care Act tax provisions impacting executive pay for health insurers, among other changes. See related story, How Will The Proposed AHCA Be Different From the ACA For Employers?
Health insurers and executive compensation experts are keeping a close eye on American Health Care Act developments. The proposed repeal of the ACA-mandated tax provisions would be effective for tax years beginning after Dec. 31, 2017.
Executive Pay Deduction Limit
Under Section 162(m) of the tax code, public companies generally can take a business expense deduction of up to $1 million for certain executives. The ACA-mandated tax provision under Section 162(m)(6) further limits the deduction that health insurers can take for executive pay to $500,000. The intent of Section 162(m)(6) is to deter companies from utilizing company revenue to provide excessive executive pay.
The American Health Care Act proposes to repeal the $500,000 cap on the deduction health insurers can take for executive pay. Betsy Field, of Willis Towers Watson, told Bloomberg BNA March 22, “The large publicly traded insurers would be back on the same footing as other publicly-traded companies with respect to tax deduction limits on executive compensation (i.e., still subject to IRC Section 162(m)) and other for-profit insurers would no longer have a limited tax deduction for executive compensation.” Field added, “This proposed change is obviously inconsequential for tax-exempt health insurance organizations.”
Other Provisions Impacting Executives
The American Health Care Act proposes to repeal two additional ACA-mandated tax code provisions impacting wages over statutory thresholds as follows:
Executive compensation experts shared that executive pay practices won’t be impacted by the proposed ACA repeal efforts. Field said, “This proposed change is a financial win for for-profit health insurers, but not likely to have a material impact on executive pay programs in the industry.” Field added, “Overall, we did not see a shift in the design of executive compensation programs when Section 162(m)(6) was added through the ACA and we do not anticipate any significant changes in the structure of executive compensation packages if it is repealed.”
“As health-care continues to evolve, it will be even more critical for health insurance companies to ensure they have the right leaders and the right pay plans to ensure success for all of their stakeholders,” Field said.
Stay on top of the latest industry trends and news coverage with a free trial to the Benefits Practice Resource Center.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)