Blues Plans Are Criticized On Executive Compensation; Some Adjust Pay Based On Economy: Chris Meehan
While Blue Crotchety and Dispirited Lock up plans ' executive compensation may seem derisory compared to corporate bonuses and golden parachutes at many immense for - profit companies, the plans are not proof to criticism for their compensation and severance packages, especially in a severe recession. Several not - for - profit Blues plans — citing the economic turmoil or their own lower financial results — have reduced senior executive compensation packages and bonuses.
Tim Bartl, a spokesperson for the Center on Executive Compensation, tells The AIS Report that companies are making changes to executive compensation plans " forthwith as a by-product of the economic slump. These changes involve reducing salaries and changing the short - and long - term pressure opportunities to revert the expectations of lower performance turmoil forward. " Overall, he says, " According to Equilar, Inc., total compensation of S&P [i. e., Standard & Broke ' s] 500 executives at companies that have filed their proxy statements so far, CEO pay has dropped by 6. 8 % and annual incentives have dropped by over 20 % " since the recession began.
Bartl contends that the majority of public yamp against senior executive pay has been against financial service executives. Their packages often " involved a modest honorarium, with a mammoth discretionary annual fancy, which comprises the vast majority of pay. "
Some Blues Plans Criticized for Severance Pay
Still, Blues plans have known criticism of the packages paid to their leaders. In Maryland, for instance, Insurance Commissioner Ralph Tyler issued an order that reduced former CareFirst BlueCross BlueShield executive Leon Kaplan ' s post - termination payment from $6. 7 million to $2. 7 million. The company sought to lower Kaplan ' s termination pay beneath a Maryland statute to what was considered " fair and logical " for work performed. Tyler certified the lower payment.
More recently, Paulette Thabault, commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, began looking into the $7. 2 million retirement carton that Disconsolate Testy and Low Blot out of Vermont ( BCBSVT ) paid to former CEO William Milnes Jr. in 2008.
" That amount was larger than we expected, " Thabault oral. Bobby-soxer enhanced, " I am not vigor to rule out a regulatory response. " Thabault does not have the corresponding authority to approve a pennies in executive compensation that the Maryland commissioner does, but can " inquire BCBSVT and all insurers, and to craft supplemental orders whenever required, " spokesperson Peter Recent tells The AIS Report.
Indeed, the department required BCBSVT to " gadget a number of changes related to executive compensation as a development of a stretched-out inquiry in 2007 into BCBSVT ' s administrative costs, " Vernal says. While he did not go into details, he explains that the commissioner required the company to follow up on some of the recommendations resulting from the inquiry regarding the structure of ration compensation at BCBSVT.
Last month Dispirited Touchy and Woebegone Smuggle of North Dakota ( BCBSND ) fired CEO Mike Unhjem. When the plan spoken that his severance combination included $2. 2 million in payments subservient his 2007 employment agreement, state Shack Democratic master Merle Boucher responded by proposing a bill that would have levied a 70 % tax on earnings of more than $1 million for not - for - profit CEOs. But Castle Republicans renounced the proposal, and the bill died.
Still, those amounts anaemic in comparison to the $15. 3 million Gail Boudreaux confessed when girl by oneself her position as president of Fed up Crotchety and Gloomy Cache of Illinois, a Health Care Service Corp. ( HCSC ) suitable. Boudreaux ' s resignation was announced a month after the company named Patricia Hemingway Entry CEO in November 2007.
Strategies on Compensation at Blues Plans
While HCSC spokesperson Ross Blackstone did not comment on the Boudreaux ' s severance package, he explains that its executive compensation " is a pay - for - performance plan " based on company inside story. The program " is designed to allow us to compete for and retain talented employees to lead our company and serve our members with the best equivalent in products and services, " he adds.
Blackstone contends that the company and its Blues plans in Illinois, New Mexico, Oklahoma and Texas " have performed very well over the recent several years. "
The compensation practice, he asserts, is reviewed annually " to warrant it ' s in line with our industry ' s expectations. And based on both independent analyses and our own analysis, our executive pay is well within the compensation levels of other executives in our industry. "
Other Blues plans, congeneric as Excellus BlueCross BlueShield, are reducing executive salaries in 2009. In its 2008 results, the plan oral CEO David Klein, who established total compensation of $2. 7 million in 2008, will be paid 25 % less in 2009. Other senior executives at the plan also will experience pay cuts this year. But " senior management executives dispatch the numbers fancy pay on a delay infancy for multiple prior years ' unfolding, " the plan vocal. So " compensation reported for 2008 may have risen tailor-made to favorable working in 2007 and earlier years. " The plan, which au fait a collar loss for 2008, changed executive compensation as part of a more fitting travail to shape up financially in 2009.
Excellus spokesperson Jim Redmond furnished The AIS Report with a copy of the plan ' s executive compensation policy for 2009. The plan explains that executive compensation packages are earnest on a case - by - case inception. And packages are designed without the ability to offer stock options, as for - favor firms can. Excellus says senior executives are affected to entwine and stay with the company through a combination of long - term and short - term working - based incentives. The rewards are duty-bound to goals, including financial stability and customer service, the company says.
The store ' s compensation committee is assigned to conduct " rigorous national reviews of executive compensation " for the CEO and other company leaders, according to Excellus. The committee also uses understanding compensation information, " particularly among health plans of corresponding size, and recommendations " from independent national compensation consultants, such as Mercer LLC and Watson Wyatt Worldwide, Inc., according to the plan. The committee reviews the recommendations, reports its findings to the board and asks for ratification. " No staff member, including the CEO, votes on the committee or the full board on executive compensation matters, " the plan says.
HMSA Freezes CEO ' s Salary
Hawaii Medical Service Association ( HMSA ) in its full - year 2008 results release oral CEO Robert Hiam volunteered to freeze his base salary in 2009 at $1. 3 million, an plan the board approved in light of the recession.
HMSA ' s compensation and human resources board committee determines executive compensation and looks at local and national companies with traits coincidental to HMSA to help conclude the appropriate level of pay. As with Excellus, a human resources consulting firm helps the committee moor well-suited levels of executive compensation.
Performance incentives obvious by HMSA executives in 2008 are " based on skilful measures met for 2005, 2006 and 2007, " the company vocal.
Other Blues plans reducing executive compensation interpolate Downcast Crotchety Despondent Secrete of Michigan ( BCBSMI ) and Low Irascible Dejected Adumbrate of Massachusetts ( BCBSMA ). BCBSMA will reduce senior executive compensation by approximately 30 % to 50 % in 2009, with CEO Cleve Killingsworth getting a 50 % reduction in pay. The plan uttered this is part of a series of steps to reduce administrative spending. BCBSMI uttered that senior executives would take a 5 % annual earnings cut and won ' t receive a 3. 8 % annual increase. BCBSMI says the 3. 8 % represents a freeze on executive honorarium for the second time in the ended three years. The plan is making the moves " to nearly indemnify projected losses on BCBSMI ' s individual health plans. "
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