From Health Plan Week

Centene CEO Neidorff Tops List of Highest Paid Health Plan Execs, Dethrones Bertolini (with Table: Total Compensation for Publicly Traded Health Insurer CEOs in 2014)

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By ,
June 1, 2015Volume 25Issue 19

Centene Corp.’s nearly 80% stock price gain for 2014 paid dividends in spades for its CEO Michael Neidorff. He amassed a stock award-fueled $19.3 million in compensation last year, putting the head of the Medicaid managed care specialist atop the yearly table of highest-paid publicly traded health insurer executives. In filings to the Securities and Exchange Commission (SEC) over the past two months, insurers maintained or improved base salaries for their CEOs in a modest fashion, with total compensation mainly dependent on how many shares and options were cashed in by their corporate heads.

And because of the incredibly strong equity market performance by most publicly traded health plans in 2014 — which for example saw Aetna, Inc. gain 32% year-on-year and Molina Healthcare, Inc. 48% — it is logical that compensation tied to the fluctuations on Wall Street is the focus, says Steven Kaplan, a professor of finance at the University of Chicago Booth School of Business.

“Salary is less of a factor. Bonus and equity-based pay have increased over time,” he tells HPW. Kaplan says when it comes to how much to fork over for top executives, the board decides which direction to go. “Boards face two countervailing pressures. On the one hand, there is pressure for fairness. On the other hand, there is pressure to find the best CEOs and pay market prices for them,” he adds.

That market price is quite steep, even in relation to the billions in revenue major corporations are raking in. For instance, according to an Equilar/AP study, the median compensation for the CEOs of Standard & Poor’s 500 companies stood at a record $10.6 million per year in 2014, besting the $10.5 million mark from the prior year. The average CEO compensation for the 11 publicly traded health plans HPW reviewed was just under $11 million.

The Affordable Care Act did seek to address executive compensation by changing the tax code to single out insurers, making them pay more taxes on higher salaries by restricting the deductibility of compensation paid by a health insurer. But Kaplan says the provision was not a factor in 2014 or the year before.

Majors Lose to Centene CEO in Pay Race

While the “big five” insurers did not pay their CEOs peanuts by any means (see table, p. 3), none could surpass the bounty of Neidorff, who saw his total payout increase to more than $19 million last year from $14.5 million in 2013, a 33% improvement. Of his 2014 compensation, he received $1,200,000 in base salary, $3,600,000 in bonuses, $570,837 from other compensation and a massive $13,930,000 in stock awards.

The highest earner for 2013, Aetna Inc. CEO Mark Bertolini, came in second to the Centene chief with 2014 compensation of $15 million, half of what he made two years ago when stocks and options boosted his take-home to more than $30 million (HPW 5/19/14, p. 1). Bertolini’s base salary in 2014 was $996,169, according to Aetna. The rest of his 2014 pay package came from $12 million in stock and options rewards, $1.7 million in non-equity incentive plan compensation and $400,000 in other compensation.

Within a hair of Bertolini was UnitedHealth Group CEO Stephen Helmsley who made $14.9 million in 2014, a gain of 23% from 2013 when he made $12.1 million. Cigna Corp. CEO David Cordani placed fourth with $14.5 million in compensation for 2014, a gain of $1 million from 2013. Stock and options accounted for $11 million of his pay for last year, Cigna said in its SEC filing.

Rounding out the top five was Anthem, Inc. CEO Joseph Swedish, who saw his compensation decline 21% to $13.5 million from $17 million in 2013. Trailing Swedish was Health Net, Inc. CEO Jay Gellert at $12.5 million, a 37% gain from his 2013 package of $9.1 million. Humana CEO Bruce Broussard earned $10.1 million in 2014, 14% better than 2013 when he made $8.8 million.

Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, tells HPW the robust compensation paid to CEOs across all industries is based on the external factors that board-level compensation committees rely on. He says the “system has baked in peer groups” as the measurement stick for corporations to decide on how much to pay their own executives. “Everyone is being compared to others in the same industry. Rather than being developed internally, it is being done externally,” Elson says.

The flaw in doing this, he says, is that looking to peer groups assumes there is lateral transition among top executives, like an Anthem CEO deciding to become CEO of Cigna, which is not the case.

On another front, he called it interesting that some companies, like Aetna, have acted to increase the pay of its lowest-paid workers. Aetna’s Bertolini on Jan. 12 said starting this past April the carrier would raise the minimum base hourly wage for its U.S. employees to $16, affecting approximately 5,700 employees across the U.S. On average this change will result in an 11% wage increase for affected employees, and for some it may be as much as a 33% rise (HPW 1/19/15, p. 7).

Under the Dodd-Frank Act’s pay ratio provision, the SEC must write rules mandating that public companies disclose the ratio between the total compensation of a company’s CEO and the median compensation of all other employees. This in part will likely lead other companies to follow Aetna’s lead in narrowing the gap between the highest and lowest compensated employees, Elson says. “That requirement next year or the year after will force a lot of companies to rethink things,” he adds.

Total Compensation for Publicly Traded Health Insurer CEOs in 2014



Total Annual Compensation

Full Year Increase or (Decrease)

Centene Corp.

Michael Neidorff,

2014: $19.3 million
2013 $14.5 million


Aetna Inc.

Mark Bertolini,

2014: $15.0 million
2013: $30.7 million


UnitedHealth Group

Stephen Helmsley,

2014: $14.9 million
2013: $12.1 million


Cigna Corp.

David Cordani,

2014: $14.5 million
2013: $13.5 million


Anthem, Inc.

Joseph Swedish,

2014: $13.5 million
2013: $17 million


Health Net, Inc.

Jay Gellert,

2014: $12.5 million
2013: $9.1 million


Humana, Inc.

Bruce Broussard,

2014: $10.1 million
2013: $8.8 million


Molina Healthcare, Inc.

J. Mario Molina, M.D.,

2014: $7.9 million
2013: $11.9 million


WellCare Health Plans, Inc.

David Gallitano,*

2014: $5.4 million
2013: $2.7 million


Triple-S Management Corp.

Ramon M. Ruiz-Comas,

2014: $4.2 million
2013: $3.0 million


Universal American Corp.

Richard Barasch,

2014: $3.6 million
2013: $2.5 million


*Kenneth Burdick became CEO on Jan. 1, 2015, replacing Gallitano.

SOURCE AND METHODOLOGY: Compiled by Atlantic Information Services, Inc. from company financial statements. Total compensation includes base salary, bonuses, stock awards, options/stock appreciation right (SAR) awards, non-equity incentive plan compensation, non-qualified deferred compensation earnings and all other compensation.

© 2015 by Atlantic Information Services, Inc. All Rights Reserved.

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