The Patient Protection and Affordable Care Act's limits on the tax deductibility of health insurance company executive pay saved taxpayers more than $70 million last year, according to a report from the Institute for Policy Studies, a multi-issue think tank.
Beginning in 2013, the PPACA lowered the cap on deductibility of health insurance executive compensation from federal corporate income taxes from $1 million per executive annually to $500,000. The law also eliminates an exception from the deductibility limit for stock options and other performance-based pay. Furthermore, the cap can now be applied to all employees, instead of being limited to four executives, according to the report. The IPS analyzed the pay records of 57 executives from the 10 largest publicly held health insurance companies to determine the impact of these PPACA provisions in 2013. The analysis produced the following three key findings.
1. The PPACA's deductibility caps resulted in at least $72 million in additional public revenue in 2013 from the country's 10 largest insurance companies.
2. Although health insurance company executive compensation didn't decrease last year, the portion of their pay health insurance executives could claim as deductible fell to 27 percent, compared with 96 percent in 2012. The 10 companies analyzed owed an additional $1.3 million in taxes for each executive on average in 2013.
3. If the federal government applied the same deductibility limits to all major U.S. corporations, taxpayers would save $50 billion during the next decade, according to the analysis.