At some point in the near future, we predict that executive medical benefits will be the next perk destined for the dust bin. Under the healthcare reform law (PPACA), the IRS is to issue rules implementing nondiscrimination requirements for insured medical plans. The IRS is virtually certain to apply those new rules to self-insured plans too. While there is much debate about the exact scope that the nondiscrimination rules will take, it is hard to see how health insurance that covers only senior executive will be a viable option from an economic standpoint. There will either be a penalty on the company (insured plans) or a significant tax hit on the executive (self-insured plans).
The final blow may be the proxy disclosure consequences of the penalty. If a company incurs a penalty to provide special health insurance to named executive officers, that penalty would be part of the company’s aggregate incremental cost for the perk. That could lead to footnote disclosure of the amount of the penalty as part of the methodology for computing the aggregate incremental cost of the executive health insurance. Disclosing both the cost of executive medical insurance and a penalty for a discriminatory plan may be too much for many companies to swallow.