The Insurance Industry Learns That Congress May Giveth, but Congress Also Taketh Away


Congress attempts to atone for writing a health-care bill that's been called the insurance industry's "Holy Grail:"

Voting 14-8, the [Senate Finance] committee approved an amendment that would limit the tax deductibility of compensation for insurance executives to $500,000 a year. The limit would apply to executives at companies that get significant business generated by the bill's mandate that nearly all Americans must have insurance. Under current law, businesses can deduct up to $1 million a year in compensation for executives.

Sen. Blanche Lincoln (D., Ark.) said the limit is needed because insurance companies are going to reap a windfall of new customers under the legislation. "This is the right thing, and the right message to the American people," said Sen. Lincoln, who is up for reelection next year. The amendment was supported by all Democrats on the panel, plus Sen. Olympia Snowe (R., Maine).

Perhaps this is not the worst thing in the world (although it may create some problems for insurance companies trying to attract top talent). But it does suggest that, as Ramesh Ponnuru argued in April, the health-care reforms we're seeing now would essentially turn health-insurance companies into regulated and subsidized quasi-public utilities: Everyone is forced to buy in, but as a consequence, the industry is subject to meddling, rules, and strict oversight.

Of course, you can't exclusively chalk this up to unwanted meddling: The insurance companies have supported all of the major parts of the framework except the public plan from early on. Making deals with Congress can resemble making deals with the Godfather—maybe you can get something you want at first, but you never know how much you'll have to pay for it down the road.