Lincoln Amendment on Health Insurance Exec Compensation Passes Senate Finance Committee

Lincoln provision cuts level of health insurance exec compensation subsidized by taxpayers

October 2, 2009 -- Washington – U.S. Senator Blanche Lincoln today announced that the Senate Finance Committee has approved her amendment to reduce taxpayer subsidies to insurance companies for extravagant executive benefits.

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The savings from Lincoln's amendment, now included in the Committee’s proposed health care reform bill, will ensure that 12 Arkansas community health centers do not lose revenue when treating newly insured patients gaining coverage through the new Health Insurance Exchanges. It will also ensure health insurance company executives do not receive a personal windfall and the companies they work for do not receive excessive tax breaks while at the same time profiting from a government requirement that all individuals purchase health insurance.

Under current law, businesses can deduct up to $1 million annually per executive. Lincoln’s amendment, now included in the Committee’s proposed health care reform bill, would cut this $1 million tax shelter to $500,000 annually as the amount that can be deducted as a business expense and tighten existing loopholes regarding deferred compensation. This new policy change would apply to businesses that provide coverage meeting the individual mandate requirements. It does not dictate what a business pays an employee, but it does limit the taxpayer subsidies for the compensation.

“Under current law every Arkansas taxpayer and every US taxpayer subsidizes health insurance executives’ unlimited salaries and deferred compensation packages,” Lincoln said. “My amendment is a fair policy change aimed at reassuring consumers that health insurance executives aren’t receiving a personal windfall and the companies they work for are not receiving excessive tax breaks while at the same time profiting from a government mandate. It is my hope that this new policy would encourage the insurance companies to put those additional premium dollars toward lower rates and more affordable coverage for consumers, not in their own pocketbooks.

“Those who defended the status quo for health insurance companies in opposition of my amendment argued that if we did not maintain the existing tax subsidy for this executive compensation, then the costs would be passed on to consumers in the form of higher premiums. That assumption is based on the current, broken marketplace where insurance companies bully customers and monopolize choices. With the common-sense reforms in our bill, we will change the way insurance companies do business and offer consumers more choices, forcing insurance companies to work to keep the business they have.”

Lincoln’s provision was coupled with another amendment that would ensure that Federally-Qualified Health Centers (FQHCs, also known as “Community Health Centers”) would not lose revenue when treating newly insured patients gaining coverage through the new Health Insurance Exchanges.

Arkansas is home to 12 such health centers operating at 60 sites all across the state, which together treated 118,719 patients in Arkansas in 2007. The health centers are non-profit, community-directed providers located in high-need areas and open to all residents, regardless of insurance status or ability to pay.

“Community Health Centers have been critical sources of quality care for Arkansans,” Lincoln said. “They are a cost-effective investment by reducing costly emergency, hospital, and specialty care, saving the health care system billions of dollars annually.”

Source: Senator Blanche Lincoln