Published: 2009-10-25 21:28:53
Author: Elizabeth MacDonald | FOX Business | October 8, 2009
Health insurer executive pay is in the bulls' eye in DC, with the Senate Finance Committee pushing hard on a plan to limit the corporate tax deductibility of health insurers' pay if these companies make a lot of money off of health reform.
And Democratic Congressmen Henry Waxman and Bart Stupak are now beavering away at collecting information for potential hearings on executive pay and corporate junkets from at least 52 health insurers, in an effort to shame them into reform. The moves come as the Federal Reserve and the pay czar crack down on executive pay on Wall Street.
We've got a bead on what Congress might be looking at in health insurer pay. For example, Martin Sullivan, the former chief executive of AIG, one of the country’s biggest bail-outs as it got $185 bn in taxpayer money, is getting free medical insurance coverage. For life. Other health insurance execs also get free medical insurance and free medical exams as well. For more, see below.The executives are getting these freebies at a time when family health care costs are big enough to block out the sun, and when insurers are denying coverage for all sorts of pre-existing conditions, as well as coverage for things like brain tumors, bone marrow transplants, maternity care, even if consumers have acne, varicose veins, or bunions.
Attacking executive pay is a real crowd pleaser for voters angry about the bailouts and deficit spending, as the economy is still on thin ice, as health insurers deny coverage, and as the banks are still careening around in a hospital gown.
However, the “executive pay as silver bullet to greed” story is a classic example of the autopilot thinking in DC.
The blame-it-on-executive pay angle is a panacea, a one-size-fits-all solution that invites a dangerous complacency, that capping pay will somehow stop rampant excesses on Wall Street or at health insurance companies.
It doesn’t work. Wall Street has already shown that the government’s past attempts at capping executive pay is the equivalent of pressing down on Jell-O, because executives figure out other ways to get richly paid.
Take what happened in the late ‘90s, when the government tried to cap the tax deductibility of executive pay at $1 mn. Wall Street invented other paper to pay themselves with, stock options, which then exploded in use.
For both the banks and insurers, what might stop the excesses could entail pre-emptive moves instead of this costly after-the-fact refereeing.
Like re-enacting Glass Steagall, which would separate the utility operations of retail deposits from the casino that bankers gamble in daily to hit their earnings.
Resurrecting the firewall of Glass Steagall between the utility and the slot machines might reduce bonuses naturally, as it might curtail the reckless bets and also might reduce the need to pay for extra bureaucrats to supervise individual banks.