Featured Health Business Daily Story, Dec. 23, 2010

Pay for Blues Plans’ Board Chairs Could Decline in Next Few Years (with Table: 2009 Annual Compensation for Selected Blues Plans’ Boards of Directors)

Reprinted from THE AIS REPORT ON BLUE CROSS AND BLUE SHIELD PLANS, a hard-hitting independent monthly newsletter on new products, market share, strategies, conversions, financing, profitability and strategic alliances of BC/BS plans. (Not affiliated with the Blue Cross and Blue Shield Association or its member companies.)

December 2010Volume 9Issue 12

Compensation paid to board chairs of several Blue Cross and Blue Shield plans rose in 2009, according to an AIS review of 2009 Blues plans’ board of director pay. However, one analyst predicts that those same leaders could see their compensation either drop or remain static over the next few years as provisions in the federal health reform law and other Internal Revenue Service guidelines take effect.

Paul Dorf, managing director of Compensation Resources, Inc., in Upper Saddle River, N.J., tellsThe AIS Report that “excessive compensation will be considered a ‘no-no’ and large increases won’t be on the board for the foreseeable future.”

AIS collected compensation data for Blues plans’ boards of directors from state insurance departments and the Securities and Exchange Commission (see table, p. 7).

At several Blues plans, the CEO also serves as chair of the board of directors. As a result, those board chairs have compensation that is much higher than their counterparts at Blues plans where the board chair and CEO roles are split between two people.

For example, Robert Lufrano, M.D., the chairman and CEO of Blue Cross and Blue Shield of Florida, was paid $4,643,519 in 2009 for his dual roles. Malcolm Sellers, chairman and CEO of BlueCross BlueShield of South Carolina, received $2,533,595 last year, and John Forsyth had $2,403,155 as chairman and CEO of Wellmark, Inc.

As for Blues plans where the board chairman holds only that position, the top pay went to Milton Carroll, chair of Health Care Service Corp. His compensation of $944,951 included $922,000 for compensation paid or deferred for services as a member of the board of directors and $22,951 for all other compensation paid or deferred. His compensation was a 21% increase from 2008, when he received $782,000.

Fourteen of the 19 Blues plans for which AIS was able to review board compensation for both 2008 and 2009 boosted pay for the board chair over that time, with nine of those plans increasing compensation by more than 10%.

Dorf called the compensation increases excessive “because I don’t think the numbers have been that big for any other industry.” He added that having nearly half of the board chairmen getting raises of at least 10% “is very high in a time when in the last two years, budget increases have been two to two and a half percent.”

In 2009, WellPoint, Inc. paid Larry Glasscock $662,333 for his services as nonexecutive chair of the board. Glasscock, who resigned as WellPoint’s CEO in 2007, retired from his role as board chair in March 2010. His 2009 pay included $339,041 in fees earned or paid in cash, $249,959 in stock awards, and $73,333 in all other compensation, which included an “office support stipend in the amount of $63,333.”

By comparison, in 2008, Glasscock received $593,769 in fees earned or paid in cash, $249,981 in stock awards and $139,014 in all other compensation, for a total of $982,764. Glasscock’s compensation agreement called for him to be paid a retainer of $500,000 for his work as board chair in 2008 and $250,000 per year thereafter, in addition to the fees paid to all board members.

Eight out of 19 plans also increased compensation for the highest-paid director who is not the chairman.

Plans Prep for Future Rules

Some Blues plans may have increased payment to board members for 2009 in case the reform law brought intense pressure to insurers’ profitability in future years, Dorf speculates. Regulations such the medical loss ratio rules — which will require individual and small-group insurers to spend 80% of premiums on patient care while large-group insurers are required to spend 85% — will hinder insurers’ flexibility to increase compensation to either keep their directors or entice new ones.

“To a certain degree, they are paying as much as they can or at least pushing the envelope because they know that regulations could be coming down the pipeline” that could limit compensation, he says. “The government is trying to get more information and create more transparency,” Dorf says, “and I think companies are trying to figure out how they can keep their people.”

Contact Dorf at (877) 934-0505.

2009 Annual Compensation for Selected Blues Plans’ Boards of Directors (ranked by salary of the board chair)

Blue Cross and Blue Shield Plan

Board Chair/Lead Director

Lowest-Paid Director

Highest-Paid Director

Blue Cross and Blue Shield of Florida1




BlueCross BlueShield of South Carolina2




Wellmark, Inc.3




Blue Cross Blue Shield of Massachusetts4




Health Care Service Corp.




Capital BlueCross5




WellPoint, Inc.6




Horizon Healthcare Services, Inc.




Triple-S Management Corp.7




Blue Cross Blue Shield of Michigan




Blue Cross Blue Shield of Kansas City




Excellus Health Plan Inc.8




Blue Cross Blue Shield of Arizona, Inc.




Blue Cross and Blue Shield of Nebraska




Arkansas Blue Cross Blue Shield




Highmark Inc.




Independence Blue Cross




Premera Blue Cross




Blue Cross and Blue Shield of Alabama




HealthNow New York, Inc.




Blue Cross Blue Shield of Minnesota




CareFirst, Inc.




BlueCross BlueShield of North Carolina




Blue Cross and Blue Shield of Vermont




Noridian Mutual Insurance Co.




Blue Cross Blue Shield of Wyoming




BlueCross BlueShield of Tennessee




1 Robert Lufrano earned $4,643,519 as chairman, CEO and board chair.

2 Malcolm Sellers earned $2,533,595 as CEO and board chair.

3 John Forsyth earned $2,403,155 as CEO and board chair.

4 Cleve Killingsworth earned $1,980,070 as president, CEO and board chair.

5 William Lehr earned $837,340 as president, CEO and board chair.

6 A portion of compensation is stock awards.

7 A portion of compensation is stock awards.

8 Compensation reflects service as directors for Lifetime Healthcare Cos., Excellus’ parent company.

SOURCE: Compiled by Atlantic Information Services, Inc. from state insurance department filings and Securities and Exchange Commission data.

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