Health insure bosses make bigtime bucks
12 03 08 - 12:03
Bay State health insurance bosses are raking in multimillion-dollar pay packages - and politically wired powerbrokers get tens of thousands as part-time directors - even as the state and its taxpayers struggle to pay skyrocketing health care costs, a Herald review shows.
Blue Cross Blue Shield, by far the state's largest insurer, paid nine million-dollar pay packages - including base salary, bonus, retirement and health care benefits, parking allowances and other perks - to its top executives in 2007. The nonprofit firm's CEO, Cleve Killingsworth, was paid $3.6 million, including a bonus of $1.8 million, according to compensation records filed with the state Division of Insurance.
Blue Cross also paid significant sums to its politically connected board of directors. Among them:
The board's vice chairman, Robert Haynes, head of the Massachusetts AFL-CIO: $70,900;
. Greater Boston Chamber of Commerce chief Paul Guzzi: $55,900;
. Ralph Martin II, former Suffolk district attorney: $54,957;
. Philip Johnston, former head of the state Democratic Party: $50,844;
. Marian Heard, former United Way of Massachusetts Bay CEO: $48,444;
. Gloria Larson, Foley Hoag partner and chairwoman of the Massachusetts Convention Center Authority: $44,700.
In all, the state's three biggest health insurers paid 11 executives more than $1 million each in total compensation last year, and more than two dozen senior managers got bonuses upward of $100,000.
"These salaries are out of control," said state Sen. Mark Montigny (D-New Bedford). "They don't pass the smell test or the laugh test. These insurers are hiding behind the veil of their not-for-profit status."
Through a spokesman, Guzzi referred questions to Blue Cross. The other directors did not return phone calls seeking comment.
Blue Cross holds seven board meetings a year, but company representatives said board members also serve on subcommittees that help make significant policy decisions.
"Directors have a lot of responsibility for shaping and implementing the CEO's vision," Blue Cross spokesman Chris Murphy said. "It's not just showing up for an occasional meeting."
The pay packages are drawing increasing scrutiny on Beacon Hill as lawmakers debate ways to curb the exponential growth in health-care costs. Legislation being considered today would force insurers and health providers to publicly document reasons for increasing costs of insurance and medical procedures.
Industry officials said such documentation would show that executive salaries account for a small fraction - less than 10 percent - of overall health-care costs.
Representatives of insurers said they must offer competitive compensation to attract executives who could earn millions more in stock options in the private sector.
"Paying for premium talent keeps us financially stable, it keeps us innovative and it keeps health care as affordable as possible," said Murphy, noting that executive pay at Blue Cross is based largely on performance incentives meant to make the company run within tight financial margins.
Still, some lawmakers argue that insurers are contradicting the nature of their nonprofit status when their executives are profiting handsomely from their work. In addition to Killingsworth at Blue Cross, Harvard Pilgrim CEO Charles Baker was paid $1.3 million last year and Tufts CEO James Roosevelt got $1.1 million.
"It's egregious," said state Sen. Steve Baddour (D-Methuen). "Here we are, fighting to keep down costs amid double-digit increases, and how many millions are these nonprofits giving out? They should add it all up and return it in rate relief."
Experts in executive compensation said, however, that the increasing pay is driven by dramatic inflation in salaries paid to CEOs in general.
"People have a hard time reading that the guy at the health plan is being paid $1 million a year, but (insurers) have to use a benchmark based on other for-profit firms conceivably interested in these executives," said Fred Foulkes, professor of organizational behavior at the Boston University School of Management.
"It's the market, and that's how people keep score."