qotd: Compensation for health insurance executives

Kaiser Health News
August 27, 2014
Report: Health Law Ups Taxes On Insurers With Big Pay Packages
By Julie Appleby

While average compensation for top health insurance executives hit $5.4
million each last year (up from $5.1 million in 2012), a little-noticed
provision in the federal health law sharply reduced insurers' ability to
shield much of that pay from corporate taxes.

As a result, insurers owed at least $72 million more to the U.S.
Treasury last year, said the Institute for Policy Studies, a liberal
think tank in Washington D.C.

Researchers analyzed the compensation of 57 executives at the 10 largest
publicly traded health plans, finding they earned a combined $300
million in 2013. Insurers were able to deduct 27 percent of that from
their taxes as a business expense, estimates the report. Before the
health law, 96 percent would have been deductible.

UnitedHealth Group, which paid CEO and President Stephen Hemsley about
$28 million in pay and stock options in 2013, had the biggest tax bill
among the 10 companies, the report found. Hemsley's compensation
accounted for nearly $6 million of the firm's estimated $19 million in
taxes that the report says it owed on pay packages for five executives
under the health law.

"They're paying more in taxes just to protect these pay packages," said
Sarah Anderson, global economy project director at the institute.

Under the 2010 law, insurers can deduct only the first $500,000 of
annual compensation per employee from corporate taxes, down from $1
million allowed before the law's passage. The law also requires
insurers to include so-called "performance pay," such as stock options,
which often represent a hefty portion of an executive's pay.

http://capsules.kaiserhealthnews.org/index.php/2014/08/report-health-law-ups-taxes-on-insurers-with-big-pay-packages/

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San Francisco Business Times
August 22, 2014
Covered California's Peter Lee nets bonus, Obamacare site nets 1.2
million enrollees
By Chris Rauber

Covered California's executive director, Peter Lee, has won a one-time
$52,528 bonus for his role in launching the Obamacare exchange in the
Golden State, which apparently netted 1.2 million enrollees all told
during its first open enrollment period.

Lee's one-time bonus is his first pay increase in three years…
"excepting general state increases," and represents a 20 percent
"incentive award" based on his annual $262,644 salary.

http://www.bizjournals.com/sanfrancisco/blog/2014/08/covered-californias-peter-lee-nets-bonus.html?page=all

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Comment by Don McCanne

There are a great many reasons that health care reform activists believe
that private, investor-owned insurers should be eliminated from our
health care financing, but one reason that is particularly offensive is
the outrageous compensation packages for their executives. For that
reason, the Affordable Care Act (ACA) included a provision prohibiting
insurers from writing off for tax purposes more than $500,000 per
executive, as a means to discourage the excessive executive pay.

Well, it didn't work. Instead of taking those taxes out of the excessive
salaries, executives were given pay increases averaging $300,000,
raising their incomes to an average of $5.4 million. Although more
corporate taxes were paid, those funds were recovered through higher
premiums charged to the purchasers of health plans.

Compare the executive pay of the private insurers to that of Peter Lee,
the head of California's ACA insurance exchange - by far the largest and
most successful ACA exchange in the nation. With his performance bonus,
his income was only about one-twentieth of the average income of the
executives of the largest publicly-traded health plans. In fact, Stephen
Hemsley of UnitedHealth Group received almost 100 times as much as Lee.

These differences reflect the priorities of invested-owned corporations
as opposed to quasi-public agencies. One is about making the most money
possible, and the other is about serving the needs of the people.

Make no mistake. The ACA exchanges are still the wrong model because
they contract with these same private insurers that perpetuate their
abusive practices, such as overpaying their executives. Under a single
payer system, administrators such as Peter Lee would be providing us
with much greater value for their services since single payer systems
eliminate much of the administrative waste while spending appropriate
amounts for health care, and, yes, spending appropriate amounts for our
public administrators.