Blues Plans Are Criticized On Executive Compensation; Some Adjust Pay Based On Economy: Chris Meehan

Blues Plans Are Criticized On Executive Compensation; Some Adjust Pay Based On Economy: Chris Meehan

While Woebegone Crotchety and Melancholy Secrete plans ' executive compensation may seem paltry compared to corporate bonuses and golden parachutes at many mammoth 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 " promptly as a payoff of the economic withdrawal. These changes involve reducing salaries and changing the short - and long - term fancy opportunities to revert the expectations of lower performance game forward. " Overall, he says, " According to Equilar, Inc., total compensation of S&P [i. e., Standard & In rags ' 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 lamentation against senior executive pay has been against financial service executives. Their packages often " involved a modest fee, with a large discretionary annual craving, which comprises the vast majority of pay. "
Some Blues Plans Criticized for Severance Pay
Still, Blues plans have common 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 authenticated 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 Dismal Cross and Despondent Shroud of Vermont ( BCBSVT ) paid to former CEO William Milnes Jr. in 2008.
" That amount was larger than we expected, " Thabault verbal. Maiden in addition, " I am not action to rule out a regulatory response. " Thabault does not have the same authority to approve a pocket money in executive compensation that the Maryland commissioner does, but can " query BCBSVT and all insurers, and to craft supplemental orders whenever requisite, " spokesperson Peter Unpracticed tells The AIS Report.
Indeed, the department required BCBSVT to " device a number of changes related to executive compensation as a repercussion of a astronomical inquiry in 2007 into BCBSVT ' s administrative costs, " Girlish 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 Gloomy Irascible and Down-hearted Camouflage of North Dakota ( BCBSND ) fired CEO Mike Unhjem. When the plan vocal that his severance container included $2. 2 million in payments beneath his 2007 employment agreement, state Digs Democratic shepherd 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 Crash pad Republicans unsocial the proposal, and the bill died.
Still, those amounts waxen in comparison to the $15. 3 million Gail Boudreaux published when teenybopper godforsaken her position as president of Downcast Irascible and Dispirited Suppress of Illinois, a Health Care Service Corp. ( HCSC ) fit. Boudreaux ' s resignation was announced a month after the company named Patricia Hemingway Chamber CEO in November 2007.
Strategies on Compensation at Blues Plans
While HCSC spokesperson Ross Blackstone did not comment on the Boudreaux ' s severance box, he explains that its executive compensation " is a pay - for - performance plan " based on company ability. The program " is designed to concede us to compete for and retain talented employees to lead our company and impart our members with the best value 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 ended several years. "
The compensation practice, he asserts, is reviewed annually " to assure 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, equivalent as Excellus BlueCross BlueShield, are reducing executive salaries in 2009. In its 2008 results, the plan verbal CEO David Klein, who received 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 carry off modus operandi impetus pay on a delay onset for multiple brother years ' working, " the plan vocal. So " compensation reported for 2008 may have risen useful to favorable outgrowth in 2007 and earlier years. " The plan, which lettered a entangle loss for 2008, changed executive compensation as part of a more select stab to refine 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 obstinate on a case - by - case beginning. And packages are designed without the ability to offer stock options, as for - prosperity firms can. Excellus says senior executives are responsive to put together and stay with the company through a combination of long - term and short - term movement - based incentives. The bays are chargeable to goals, including financial stability and customer service, the company says.
The larder ' 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 choice compensation information, " particularly among health plans of matching size, and recommendations " from independent national compensation consultants, related 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 stipend in 2009 at $1. 3 million, an vivacity 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 companion to HMSA to help bias the fit level of pay. As with Excellus, a human resources consulting firm helps the committee stabilize tailor-made levels of executive compensation.
Performance incentives down pat by HMSA executives in 2008 are " based on adroit measures met for 2005, 2006 and 2007, " the company oral.
Other Blues plans reducing executive compensation insert Depressed Testy Gloomy Dissemble of Michigan ( BCBSMI ) and Down-hearted Touchy Depressed Disguise 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 verbal this is part of a series of steps to reduce administrative spending. BCBSMI uttered that senior executives would take a 5 % annual emolument cut and won ' t receive a 3. 8 % annual increase. BCBSMI says the 3. 8 % represents a freeze on executive salary for the second time in the past three years. The plan is making the moves " to almost offset projected losses on BCBSMI ' s individual health plans. "
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