Executives at insurers with large Medicaid and Medicare operations may now have a new edge over colleagues at insurers that focus mainly on the commercial health insurance market.

Federal regulators have decided that the Patient Protection and Affordable Care Act (PPACA) $500,000 cap on the deductibility of health insurance executive compensation applies only to executives at commercial health insurers, not to executives at companies that provide Medicaid or Medicaid plans.

PPACA created the cap by adding Section 162(m)(6) to the Internal Revenue Code.

Insurers have to get 2 percent of their business from commercial health insurance sales before the IRC Section 162(m)(6) deductibility cap applies.

See also: PPACA pay curb could snare providers, stop-loss issuers

Tax experts have argued that the provision is discriminatory and exists solely to punish executives at health insurance companies.

Brian Wright, an analyst at Sterne Agee, says he believes the interpretation of the IRC Section 162(m)(6) rules that helps government plan issuers should help Centene, Molina and WellCare.