Skip to content Skip to footer
|

A Prescription for Treating Runaway CEO Pay

(Image: Health Care via Shutterstock)

You’ve surely heard many things about the Affordable Care Act, including the website headaches that embarrassed the Obama administration during the new program’s rollout.

But you probably didn’t realize that when you pay your premium today, you can rest assured that it’s paying for health care and not a CEO’s new yacht. You can thank the way ACA treats CEOs — and other executives — in the health care industry for that.

When lawmakers debated this landmark legislation, some members of Congress worried that it might produce a bonanza for health insurers by delivering millions of new customers to them practically overnight. Who would hold those companies accountable as all this new cash rolled into their coffers?

A major concern was that health insurance executives might fatten their own paychecks instead of investing in health care. One way these companies benefit from high executive pay is to deduct the cost of so-called “performance pay” from their federal income taxes. Corporations use that loophole to avoid billions of dollars in taxes every year.

Why not close this performance pay loophole as a requirement for health insurance companies under the Affordable Care Act?

2014 829 prescr cDr. Spoilsport’s CEO Treatment, an OtherWords cartoon by Khalil Bendib

That’s exactly what Congress did.

A new Institute for Policy Studies report I co-authored takes the first look at the impact of closing this loophole for health insurers. We found that for the 10 largest health insurance companies, the share of executive pay that could be deducted as a business expense fell dramatically from nearly 100 percent to only 27 percent after the Obama administration rolled out the ACA.

For 2013, that translated into $72 million in additional tax dollars.

In the future, this amount will likely be much higher. Why? Because most health insurer executive stock options exercised last year pre-dated the ACA and were therefore exempt from the new rules. From now on, such exemptions won’t be an issue.

Of course, once corporate boards realize how much excessive pay is adding to their corporate tax burden, they may decide to stop doling out extravagant compensation packages altogether — freeing up money to be invested in care. But even if high pay continues, at least health insurers will have to pay taxes on it — like the $72 million they had to pay for 2013.

And what could that $72 million pay for?

Dental care for 262,000 people for an entire year. Or the annual deductible for 28,000 Americans for an entire year.

In addition to closing the pay loophole, the Affordable Care Act also requires health insurers to spend at least 80 percent of customer premiums on health care.

More than 10 million Americans have already gained coverage because of the new law. That it’s also holding the profit-making side of the health care industry accountable is a great bonus for all of us.

We’re not backing down in the face of Trump’s threats.

As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.

Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.

As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.

At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.

Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.

You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.