Revision gives nonprofit insurers tax breaks

Among the changes Senate Democratic leaders made to the massive health care package unveiled Saturday was giving nonprofit health insurance companies a limited exemption from the excise tax levied on insurers, a revision pushed by Sen. Carl Levin, who is a major recipient of campaign contributions from mega-nonprofit Blue Cross Blue Shield.

The excise tax, or fee, on health insurance companies was expected to bring in $6.7 billion to help pay for the nearly $1 trillion bill, but the exemption for nonprofits won by Mr. Levin, Michigan Democrat, could cut the revenue by as much as half.

It was unclear Saturday how the exemption would affect the cost of the bill or how many nonprofits would qualify for the exemption, attained by spending a high enough percentage of revenue on health services. However, the language appeared to clearly protect Blue Cross Blue Shield of Michigan from the fee.

Mr. Levin said the bill should “distinguish between the true nonprofit insurance companies and most profitable insurance companies in the country, and I’ve been working to fix that because I think that distinction is important.”

Nonprofit health insurers - which insure about 45 percent of Americans and include multistate companies such as CareFirst Inc. and Health Care Service Corp. - are virtually indistinguishable from their for-profit competitors.

The insurance premiums paid to nonprofits are often as high as those paid to for-profit insurance companies. Top executives at nonprofits also take home paychecks just as huge as those of their for-profit counterparts.

For example, nonprofit Blue Cross Blue Shield of Massachusetts CEO Cleve Killingsworth’s total compensation in 2008 was just over $1 million, compared to for-profit Wellpoint Inc. CEO Angela Braly’s $1.13 pay package that year, according to health industry data service Atlantic Information Services Inc.

Blue Cross Blue Shield of Michigan CEO Daniel Loepp made $910,269 in 2008.

Federal Elections Commission data show Mr. Loepp also gave Mr. Levin’s campaign committee $3,000 in the course of the 2007 and 2008 election cycles.

Mr. Levin’s top campaign contributor from 2005 into the 2010 election cycles was Blue Cross Blue Shield, with total contributions of $48,000 from its employees and its political action committee, according to campaign finance data from OpenSecrets.org.

Mr. Levin originally drafted the exemption language as an amendment to the health care bill. But the language was added as Senate Majority Leader Harry Reid, Nevada Democrat, wrote the final package behind closed doors.

The No. 2 Senate Democrat, Richard J. Durbin of Illinois, said he supported the exemption because nonprofits deserve a break.

“They are nonprofits for a reason. They are trying to keep the cost of health care down,” he said.

The legislation is intended to expand health care coverage to millions of uninsured Americans, guarantee coverage by prohibiting the denial of insurance due to pre-existing medical conditions and hold down skyrocketing health care costs.

Critics of the exemption say the nonprofits would be granted an unfair advantage in the insurance marketplace, as the excise tax pushes up the cost of doing business and premiums at for-profit insurance companies.

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