From The AIS Report on Blue Cross and Blue Shield Plans. Not affiliated with the Blue Cross Blue Shield Association or its member companies.

Blues CEOs Banked $110 Million In 2015, Most From Bonuses, Other Compensation (with Table: 2015 Annual Compensation for Top Executives at Blue Cross Blue Shield Plans)

The AIS Report on Blue Cross and Blue Shield Plans (not affiliated with the Blue Cross Blue Shield Association or its member companies) is a monthly update for HEALTH PLAN WEEK subscribers that covers timely news, insightful analysis and comprehensive data on Blues plans’ products, market share, strategies, profitability and alliances. Learn more.

October 2016Volume 15Issue 10

With $1.5 million in salary and more than $15 million in bonuses and other compensation, former Health Care Service Corp. (HCSC) CEO Patricia Hemingway Hall retired at the end of 2015 as the nation’s highest-compensated Blues plan CEO, according to data provided to The AIS Report by the Illinois Dept. of Insurance. In 2014, her compensation package was worth $11.7 million. HCSC operates Blues plans in Illinois, Montana, New Mexico, Oklahoma and Texas.

Paula Steiner, previously HCSC’s executive vice president and chief strategy officer, took over as president and CEO on Jan. 1, 2016. In 2015, she earned $849,000 in salary and $4.8 million in bonuses and other compensation. Nine other members of HCSC’s executive team also had substantially larger compensation packages in 2015 compared to prior years. Their combined packages were worth $56.7 million — up $20 million.

CEOs representing 28 Blues plans collected $110.1 million in total compensation last year, which consisted of about $24 million in salary, $54 million in bonuses and $32 million in other compensation, according to data supplied by state regulators in response to The AIS Report’s Freedom of Information Act requests and other inquiries (see table, p. 10). While CEOs from a few Blues plans saw their overall compensation dip in 2015, many had significantly higher bonuses and other financial incentives.

Health Plan Week

CEO Compensation Is Still Growing

Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, says he’s not surprised compensation packages continue to grow. “It goes back to the way these packages are put together, which is by comparing CEOs to CEOs at similarly situated companies. No board wants to pay its CEO below the median, or slightly above the median, and that creates a natural accretion in pay,” he says. “Performance-based incentives are built in, but the total package increases due to what everyone else is getting.”

When benchmarking compensation for executives, Blues plan boards are looking beyond health insurer peers, adds Donald Gallo, a leader in Willis Towers Watson’s health insurance team who works closely with Blues plans. “One of the developments we’re increasingly seeing is an expanding definition of the talent markets against which Blues are benchmarking their executive pay,” he says. For example, he says Blues plans increasingly are including integrated delivery systems in their market definition for health-allied roles, and the general industry for roles that may benefit from a broader perspective and experience base than health insurance, such as marketing, customer service and IT. Both of these approaches have tended to drive up executive pay levels.

And compensation packages grew more in 2016, according to Willis Towers Watson’s annual survey of health plans. While the median salary for health plan CEOs increased modestly between 2015 and 2016, long-term incentives jumped by 24%, driving total direct compensation (salary and incentives) up 13% overall.

Gallo notes that many Blues plan boards have either recently revamped executive incentives or are in the process of doing it for 2017. “Boards are re-examining the best performance metrics given continued market volatility, especially in the [ACA-compliant] individual market,” he explains. “Operating margins have become less predictable, creating pressure on incentive funding levels and causing many boards to increase the emphasis in their incentive plans on nonfinancial metrics like quality, customer satisfaction and strategic objectives like growth in specific business lines, IT platform implementation, etc. Increased utilization of operational and strategic measures generally increases the size of incentive payouts, and our market data reflect that phenomenon.”

Denise Cesare, former CEO of Blue Cross of Northeastern Pennsylvania (BCNEPA), saw her compensation jump more than 400% in 2015 thanks to Highmark, Inc.’s acquisition of her company in June of that year. On top of her $500,000 base salary, Cesare received severance pay — worth two-and-a-half times her annual salary — and bonuses, which brought her total compensation for the year to nearly $7 million, according to a filing with the state. Six other former BCNEPA executives received in excess of $1 million in compensation in 2015. By contrast, Highmark Health Plan CEO Deborah Lynn Rice-Johnson saw total compensation of less than $2 million in 2015.

Anthem, Inc. CEO Joseph Swedish ended 2015 with $13.6 million in total compensation — up a hair from $13.5 million in 2014. His 2015 salary was about $1.3 million, up 3.8% or $48,000 from the prior year. In addition to salary, Swedish received other compensation worth $12.3 million. On the other end of the spectrum was Timothy Huckle, CEO of Noridian Mutual Insurance Co., the parent of Blue Cross Blue Shield of North Dakota. While Huckle’s total compensation of $485,427 in 2015 was the lowest among the Blues plan CEOs evaluated by The AIS Report, it was 46.4% higher than the prior year. Among single-state carriers, Blue Cross Blue Shield of Michigan CEO Daniel Loepp had the largest package in 2015, up 21.6% from the prior year to just over $9 million.

Like Blues plan CEOs, leaders of several publicly traded health plans took home bigger paychecks. In 2015, Aetna Inc. President and CEO Mark Bertolini and Cigna Corp. President and CEO David Cordani each accumulated $17.3 million in salary and other compensation including stock awards. Centene Corp. CEO Michael Neidorff was the highest paid health plan CEO in 2015 with $20.8 million in total compensation. Centene had a robust performance on the stock market last year, with its share price rising 26% over the 12 months of 2015. The insurer’s thriving Medicaid business, fueled by states continuing to shift to managed Medicaid amid the Affordable Care Act (ACA) eligibility expansion for low-income earners, aided Centene’s profit push.

Last year, the Securities and Exchange Commission approved a rule that will — beginning in 2017 — require publicly traded companies to disclose the ratio between CEOs and the median pay of their employees (The AIS Report, 10/15, p. 1). The rule does not limit the level of compensation, but instead is intended to make the formula more transparent. While the rules don’t apply to not-for-profit companies such as most Blues plans, it could influence the way they determine compensation for their top executives, according to Elson.

2015 Annual Compensation for Top Executives at Blue Cross Blue Shield Plans

Company

President/CEO

2015 Salary

2015 Bonus

2015 Other Compensation

2015 Total Compensation

Increase From 2014

Publicly Traded, For-Profit Blues Plans

Anthem, Inc.

Joseph R. Swedish

$1,298,077

$0

$12,306,6041

$13,604,681

0.5%

Triple-S Management Corp.

Ramón M. Ruiz-Comas

$859,363

$0

$4,839,5942

$5,698,957

35.2%

Multistate Not-for-Profit or Mutual Blues Plans

Health Care Service Corporation

Patricia A. Hemingway Hall*

$1,535,043

$14,973,474

$63,630

$16,572,097

29.50%

Wellmark, Inc.

John D. Forsyth

$702,500

$2,474,098

$72,028

$3,248,626

-9.4%

CareFirst, Inc.

Chester Burrell

$1,011,539

$1,814,200

$41,511

$2,867,250

7.1%

Cambia Health Solutions, Inc.3

Mark B. Ganz4

$816,525

$1,559,618

$127,762

$2,503,905

-4.4%

Highmark Health

Deborah Lynn Rice-Johnson

$530,318

$1,032,069

$252,751

$1,815,138

1.1%

Premera Blue Cross

Jeffrey Edward Roe

$714,958

$886,160

$138,658

$1,739,776

69.4%

Single-State Not-for-Profit or Mutual Blues Plans

Blue Cross Blue Shield of Michigan

Daniel Loepp

$1,537,661

$6,149,705

$1,338,652

$9,026,018

21.6%

Blue Cross Blue Shield of Florida

Patrick J. Geraghty5

$1,000,000

$3,000,000

$4,639,381

$8,639,381

17.2%

Blue Cross of Northeastern Pennsylvania

Denise Cesare6

$501,380

$563,077

$5,818,715

$6,883,172

418.9%

Blue Cross Blue Shield of Arizona

Richard L. Boals

$1,177,615

$3,847,795

$74,727

$5,100,137

4.3%

Independence Blue Cross

Daniel J. Hilferty7

$1,100,000

$3,191,167

$70,809

$4,361,976

15.2%

Blue Cross and Blue Shield of North Carolina

James Bradley Wilson

$1,004,749

$2,267,953

$524,317

$3,797,019

34.4%

Blue Shield of California

Paul Markovich

$1,065,354

$1,296,000

$1,153,291

$3,514,645

N/A

Blue Cross Blue Shield of Minnesota

Michael J. Guyette

$969,231

$1,985,819

$188,301

$3,143,351

7.6%

BlueCross BlueShield of Tennessee

William Morgan Gracey8*

$502,389

$1,569,764

$210,079

$2,282,232

-19.0%

Jason David Hickey8

$506,185

$693,988

$70,863

$1,271,036

18.9%

Blue Cross and Blue Shield of Nebraska

Steven S. Martin

$833,300

$1,397,027

$39,765

$2,270,092

-10.4%

BlueCross BlueShield of South Carolina

David Stephen Pankau

$381,234

$1,524,016

$74,424

$1,979,674

6.2%

Blue Cross and Blue Shield of Massachusetts

Andrew Dreyfus

$1,001,545

$792,311

$72,492

$1,866,348

10.7%

Hawaii Medical Service Association

Michael A. Gold

$840,002

$578,480

$7,704

$1,426,186

22.8%

Blue Cross Blue Shield of Kansas City

Danette K. Wilson

$617,275

$730,149

$29,824

$1,377,248

19.7%

Blue Cross and Blue Shield of Louisiana

Michael Howard Reitz

$794,806

$400,889

$35,383

$1,231,078

-7.3%

Blue Cross & Blue Shield of Rhode Island

Peter Andruszkiewicz

$725,385

$451,940

$7,379

$1,184,704

7.0%

Arkansas Blue Cross and Blue Shield

Paul Mark White

$495,850

$332,101

$56,743

$884,694

3.4%

Capital BlueCross

Gary St. Hilaire9

$339,331

$392,406

N/A

$731,737

15.3%

Blue Cross and Blue Shield of Vermont

Don George10

$604,094

N/A

$22,271

$626,365

2.8%

Noridian Mutual Ins. Co.11

Timothy Huckle

$308,813

$176,557

$57

$485,427

46.4%

Total

$23,774,522

$54,080,713

$32,277,715

$110,132,950

 

N/A = Not Available

*Indicates person is no longer CEO

  1. Swedish’s other compensation includes stock awards worth $7,800,073, option awards worth $2,599,957 and non-equity incentive plan compensation worth $1,668,678.

  2. Ramón Ruiz-Comas’ other compensation includes stock awards worth $2,999,972, non-equity incentive plan compensation worth $688,936, and change in pension value and nonqualified deferred compensation earnings worth $280,000.

  3. Operates Regence companies in Idaho, Oregon, Utah and Washington state.

  4. Compensation data for Mark Ganz includes payments allocated to insurance operations in Oregon, Utah and Washington state, but excludes payments allocated to those in Idaho.

  5. Patrick Geraghty’s total compensation is the figure reported in the state insurance document and does not equal the sum of the salary, bonus and other compensation. BCBSFL could not explain this discrepancy and responded that compensation information is proprietary and confidential.

  6. Denise Cesare’s compensation is the total annual compensation received for her service for First Priority Life Insurance Company, HMO of Northeastern Pennsylvania, Inc. and Hospital Service Association of Northeastern Pennsylvania. Effective June 1, 2015, Blue Cross of Northeastern Pennsylvania merged with Highmark, Inc.

  7. Daniel Hilferty’s compensation is the total annual compensation received for his service for Independence Blue Cross, Keystone Health Plan East, Inc. and QCC Insurance Company.

  8. William Morgan Gracey retired on Aug. 31, 2015, and was replaced by Jason David Hickey, former COO for BlueCross BlueShield of Tennessee. 2015 compensation is the total annual compensation received for service for BlueCross BlueShield of Tennessee. TennCare did not disclose 2015 compensation data for Volunteer State Health Plan, Inc.

  9. Gary St. Hilaire’s compensation is the total annual compensation received for his service for Capital Blue Cross, Capital Advantage Insurance Company, Avalon Insurance Company and Keystone Health Plan Central, Inc.

  10. Blue Cross and Blue Shield of Vermont’s filing lists only total compensation for eight unnamed officers, and does not cite Don George by name.

  11. Parent of Blue Cross Blue Shield of North Dakota.

NOTE: New York does not collect separate figures for bonus and all other compensation. Alabama, Idaho, Illinois, Kansas, Mississippi and Wyoming do not disclose compensation data for specific executives at health insurance companies. California does not require health insurance companies to disclose compensation data.

SOURCES: Individual Blue Cross and Blue Shield plans, state insurance department documents and U.S. Securities and Exchange Commission filings, compiled by Atlantic Information Services, Inc. September 2016.

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


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