Featured Health Business Daily Story, Dec. 14, 2016

Blues Plan CEOs May Be Better Value Than For-Profit Plan Execs

Reprinted from THE AIS REPORT ON BLUE CROSS AND BLUE SHIELD PLANS, a hard-hitting independent monthly newsletter on new products, market share, management strategies, profitability, strategic alliances and executive compensation of BC/BS plans. (Not affiliated with the Blue Cross and Blue Shield Association or its member companies.) Sign up for a $72 two-month trial subscription today.

By ,
December 2016Volume 15Issue 12

Despite some hefty compensation packages, top executives at Blue Cross and Blue Shield plans receive substantially less compensation than did CEOs at publicly traded insurance companies. But in terms of company revenue, CEOs of large Blues plans deliver “unexpected bang for the buck,” by generating almost exactly the same revenue per dollar of CEO pay as publicly traded health plans, according to a Nov. 28 report from Pennsylvania-based HR+ Survey Solutions.

The report — based on data from 18 Blues plans — breaks down CEO compensation by comparing it to company revenues, as well as by number of members. While Blues plans had an average of $3,049 in revenue for every dollar paid in CEO total compensation, publicly traded companies had $3,247 in revenue for every dollar in CEO total compensation. When evaluated by number of enrollees, Blues plan CEOs earned $1.20 per member in total compensation, while CEOs of publicly traded health plans earned $1.58 per member.

Judy Canavan, managing partner at HR+ Survey Solutions and author of the report, says she wanted to examine executive compensation in terms of CEO efficiency. “Larger companies are going to pay their executives more, but are they as efficient with their dollars as not-for-profit Blues plans? We found out, no…not so much,” she tells The AIS Report. She notes that compensation for publicly traded companies typically includes stock options, which are based on future stock price projections since the CEOs can’t immediately sell shares.

The AIS Report on Blue Cross and Blue Shield Plans

In October, The AIS Report determined that CEOs from 28 Blues plans collected $110.1 million in total compensation in 2015, which consisted of about $24 million in salary, $54 million in bonuses and $32 million in other compensation (The AIS Report 10/16, p. 1). But total compensation among Blues plan CEOs is about 20% of the average reported for CEOs of large publicly traded health insurance companies, according to HR+ Survey’s report.

While total compensation among Blues plan CEOs grew by an average annualized rate of 9.5% over the past year, CEOs of publicly traded health insurance companies saw total compensation jump 26.1%, according to the report.

HR+ Survey Solutions conducts annual industry and custom client surveys and provides organizations with advisory services focused on compensation plan design and assessment of appropriate compensation levels.

© 2016 by Atlantic Information Services, Inc. All Rights Reserved.

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