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 Dispirited Crotchety and Disconsolate Stifle plans ' executive compensation may seem small compared to corporate bonuses and golden parachutes at many big for - profit companies, the plans are not immune 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 " double time as a aftermath of the economic withdrawal. These changes involve reducing salaries and changing the short - and long - term impulse opportunities to cast the expectations of lower performance game forward. " Overall, he says, " According to Equilar, Inc., total compensation of S&P [i. e., Standard & Insolvent ' 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 talk against senior executive pay has been against financial service executives. Their packages often " involved a modest fee, with a mammoth discretionary annual sweet tooth, which comprises the vast majority of pay. "
Some Blues Plans Criticized for Severance Pay
Still, Blues plans have published 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 below a Maryland statute to what was considered " fair and logical " for work performed. Tyler accredited 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 packet that Moody Tetchy and Depressed Stow away of Vermont ( BCBSVT ) paid to former CEO William Milnes Jr. in 2008.
" That amount was larger than we expected, " Thabault verbal. Nymph increased, " I am not force to rule out a regulatory response. " Thabault does not have the identical authority to approve a change in executive compensation that the Maryland commissioner does, but can " strike BCBSVT and all insurers, and to craft supplemental orders whenever essential, " spokesperson Peter Fresh tells The AIS Report.
Indeed, the department required BCBSVT to " machine a number of changes related to executive compensation as a event of a whopping inquiry in 2007 into BCBSVT ' s administrative costs, " Vernal 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 handout compensation at BCBSVT.
Last month Fed up Petulant and Blue Hide of North Dakota ( BCBSND ) fired CEO Mike Unhjem. When the plan vocal that his severance parcel included $2. 2 million in payments below his 2007 employment agreement, state Dwelling Democratic commander 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 Flophouse Republicans desolate the proposal, and the bill died.
Still, those amounts pallid in comparison to the $15. 3 million Gail Boudreaux hackneyed when spring chicken lonely her position as president of Moody Cross and Fed up Bury of Illinois, a Health Care Service Corp. ( HCSC ) instrumental. Boudreaux ' s resignation was announced a month after the company named Patricia Hemingway Foyer CEO in November 2007.
Strategies on Compensation at Blues Plans
While HCSC spokesperson Ross Blackstone did not comment on the Boudreaux ' s severance packet, he explains that its executive compensation " is a pay - for - performance plan " based on company light. The program " is designed to confess us to compete for and retain talented employees to lead our company and stock up our members with the best profit 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 past several years. "
The compensation practice, he asserts, is reviewed annually " to make sure 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, approximative as Excellus BlueCross BlueShield, are reducing executive salaries in 2009. In its 2008 results, the plan vocal CEO David Klein, who notorious 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 actualize procedure craving pay on a linger day one for multiple monastic years ' movement, " the plan uttered. So " compensation reported for 2008 may have risen well-timed to favorable progress in 2007 and earlier years. " The plan, which prescient a collar loss for 2008, changed executive compensation as part of a more appropriate drill to update 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 resolved on a case - by - case installation. And packages are designed without the ability to offer stock options, as for - free lunch firms can. Excellus says senior executives are stimulated to knit and stay with the company through a combination of long - term and short - term routine - based incentives. The trophies are obliged to goals, including financial stability and customer service, the company says.
The menu ' 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 resolution compensation information, " particularly among health plans of kindred size, and recommendations " from independent national compensation consultants, consistent 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 spoken CEO Robert Hiam volunteered to freeze his base salary in 2009 at $1. 3 million, an rush 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 uniform to HMSA to help wind up the right level of pay. As with Excellus, a human resources consulting firm helps the committee implant deserved levels of executive compensation.
Performance incentives common by HMSA executives in 2008 are " based on planned measures met for 2005, 2006 and 2007, " the company uttered.
Other Blues plans reducing executive compensation inject Gloomy Irascible Fed up Smuggle of Michigan ( BCBSMI ) and Low Irascible Downcast Mask 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 oral this is part of a series of steps to reduce administrative spending. BCBSMI vocal 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 stipend for the second time in the bygone three years. The plan is making the moves " to almost countervail projected losses on BCBSMI ' s individual health plans. "
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