Trump Tax Cuts Benefiting Healthcare Companies More than People

A partial of a much larger report. The complete report can be found here. As taken from:

Americans for Tax Fairness “Sick Profits.”

This portion of the article looks at the differences in profits and where those profits are going. The additional profits (mostly gained from tax breaks) are not going to reductions in healthcare insurance, etc. for the insured. Instead, they are used for stock buybacks, increased executive benefits, benefit stockholder, etc.

Companies Exploiting the Healthcare System for Increasing Profits

The seven firms–four health insurance companies, two hospital operators, and CVS Healthcare, which in addition to its signature pharmacy chain owns the insurer Aetna and various clinics) saw their average annual collective profits rise by 75%. Profits increasing from ~ $21 billion to roughly $35 billion, between the four-year stretch prior to the law’s enactment and the seven years after. Together these companies paid essentially the same average annual federal income taxes in the latter period as compared to the former period. This represents a collective tax savings of $34 billion due to the law.

The other six corporations in the study are: vertically integrated health companies best known for their insurance products Centene, Cigna, Elevance (formerly Anthem), and Humana; hospital owner HCA Holdings; and Universal Health Services, which owns hospitals and behavioral health centers.

The 2017 Trump tax law cut the corporate tax rate by two-fifths, from 35% to 21%. The cut will cost an estimated $1.4 trillion in lost revenue over the law’s first decade. Congressional Republicans who recently succeeded in extending other provisions of the law that otherwise would have expired at the end of 2025 rejected raising the corporate rate to help pay for the $4.5 trillion in extensions. Indeed, they used the extension bill to loosen a trio of business tax-deduction rules that will add an ~$600 billion to the bill’s 10-year cost.

Contrary to the promises made by the 2017 tax law’s advocates, healthcare corporations (like the rest of Corporate America) did not use their tax savings to lower costs for customers or or provide a meaningfully boost to Labor income. Instead, much of their windfall was used to hike the salaries of top executives and increase shareholder payouts through stock buybacks and dividends.

The average annual compensation of the half dozen highest-paid employees at the seven firms beginning with CEOs? Compensation jumped by almost $100 million, or 42%, between the last three years before the law was in effect and the seven since it’s been on the books. (Meanwhile, the median wage of Labor at the seven companies rose by $14,000 between 2017 and 2024. A relatively modest 24.8% increase and slightly over half of the percentage boost enjoyed by the firms’ top bosses.).

Shareholders made out even better than the execs. While stock buybacks (which raise the value of shares remaining in investors’ hands) rose by about the same 42% as C-suite pay, dividends more than doubled, up 133% to an average of $5.6 billion in the first seven years of the law.

The Trump-GOP Tax Law’s Windfall for Healthcare Corporations

The centerpiece of the 2017 Trump-GOP tax law was a steep reduction in the corporate tax rate, from 35% to 21%. An ITEP study last year of ~300 consistently profitable corporations found in its first four years; the Trump law saved those firms a collective $240 billion.

Healthcare companies were among the biggest beneficiaries as five of the firms in the study each saved over $3 billion in federal taxes over those four years. The ITEP study covered corporate tax savings through 2021; in the three years since (through 2024) additional tax savings have pushed individual totals among the seven health-care companies in this study above $5 billion and even $7 billion.

Though the rate cut was the principal source of all those corporate tax savings, other provisions and omissions in the law helped cut the healthcare companies’ taxes further.

One giant loophole the law failed to close was in the tax treatment of stock options. An option is the right to buy or sell a commodity at a future date at a predetermined price. Corporations often award options to their top executives as compensation. The options allow employees to buy company stock at what is presumed to be a favorable future price. The tax loophole is in how they account for those option awards as a business expense.

When figuring their “book” earnings (the numbers they show Wall Street), corporations assign these options a value far below what they ultimately report to the IRS. The result is higher profits to attract investors, and lower taxable profits to reduce tax bills. Several of the companies in this study used the stock options loophole to avoid hundreds of millions of dollars in federal and state taxes.

Another defect of the law was its failure to meaningfully curb the ability of corporations to dodge U.S. taxes by shifting profits and sometimes actual production offshore.

Under the rules in effect before the Trump law, all the profits of American multinational firms were subject to U.S. taxes wherever they were made–or importantly, were claimed to be made. Ccompanies often used accounting maneuvers to shift what were really domestic earnings offshore. But corporations had an out: those foreign profits weren’t actually taxed by the U.S. until they were brought home. So American firms had trillions of dollars of earnings sitting offshore (although that was often an accounting illusion also) on which they owed up to $750 billion in U.S. taxes.

The Trump law ended the U.S. taxation of foreign profits made by American firms (though it included several, mostly ineffective provisions meant to prevent a wholesale shift of production to other countries to avoid taxes). The law also finally taxed all the existing profits sitting offshore at a sharp discount to the 35% that was owed when the profits were made.

Since the change in the tax treatment of the foreign profits of American firms, there has been less attention paid to offshore tax-haven subsidiaries set up by U.S. companies. In the last comprehensive ITEP report on this tax practice just before the new law was enacted, several of the healthcare companies in this study were found to have such subsidiaries in well-known havens like Bermuda, Switzerland, and the Cayman Islands.

A comparison of profits gained years: 2014-17 and 2018-24 Pre-Trump Tax Law vs Post-Trump Tax Law.

How Health Insurance Companies Make Money Denying Care

Although there is little transparency around the issue, health insurance claim denials appear to be rising. Claim denials often result in medical debt, which affects over four in ten U.S. adults and is the leading cause of bankruptcy. In addition, these denials can disrupt treatment for chronic medical conditions, delay or deny access to lifesaving care, and lead to avoidable complications or death. All this suffering is caused because insurance companies reap more in profits by paying out less in claims.

One survey found that, in the previous 12 months, nearly half of insured adults experienced difficulty getting their health insurance company to pay for care they had thought was covered. Specifically,

• 18 percent of insured adults reported their health insurance did not pay for care that they received, and
• 27 percent reported that their health insurance paid less than they expected for a medical bill.

Partially or completely denied insurance claims can harm both financial and physical wellbeing. Of insured adults who experienced a problem with their insurance,

• 28 percent reported paying more than expected, and

• 15 percent reported a decline in their health.

Generally, health insurance premiums have risen at a higher rate than inflation. Combining premium increases with high rates of prior authorization refusals and claim denials shows companies are charging more while providing less coverage–can be very lucrative for insurance companies and their bosses. While beneficiaries struggle to afford the health care they need, each of the health insurance companies described in this report paid their CEOs over $20 million in 2024 (in Humana’s and CVS’s case, split between two successive occupants of the top job).

Time for a reckoning.