News & Events

Blue Cross at the Trough

Blue Cross at the Trough

March 5, 2011

BLUE CROSS Blue Shield of Massachusetts couldn’t have made a better case for a “public option’’ health plan than it did by granting an $11 million golden handshake to its former CEO. At a time when elected officials, hospitals, doctors, and insurers are all trying to hold down health-cost inflation, the pay, severance, and retirement money doled out to Cleve Killingsworth is an insult to well-meaning reformers: Why should those who treat patients receive lower reimbursments when even unimpressive suits like Killingsworth make out like bandits? Perhaps Blue Cross thinks it’s being prudent because Killingsworth’s payout fell short of the $16.4 million pocketed by his longer-serving predecessor as CEO, William Van Faasen.

A government-run plan would never get away with such largesse. Yet Blue Cross enjoys the protection of private, nonprofit tax status, even as it enriches its executives with Wall Street-type deals. Blue Cross’s defense is that the contract governing Killingsworth’s compensation dates back to 2005, when the economy was in much better shape. But please: Such an amount was gaudy by any standard. Attorney General Martha Coakley, whose office has oversight of nonprofits, is right to investigate the Killingsworth deal.

While she’s at it, Coakley should press Blue Cross and the state’s other nonprofit insurers on why they compensate their board members — Blue Cross’s get as much as $89,000 a year. The state’s nonprofit hospitals and universities get along fine with unpaid board members. If a given insurer’s board members weren’t handsomely paid, they might be less willing to sign off on their CEOs’ outsized salaries.

Stratospheric pay is not required to recruit a competent leader for the state’s largest insurer. Killingsworth’s successor, Andrew Dreyfus, is getting a base pay of $800,000 with the possibility of bonuses bringing him to $1.8 million. That would be half the $3.6 million earned by Killingworth in 2008.

Like any insurer, Blue Cross is supposed to earn the roughly 10 cents it takes from each premium dollar by finding ways to keep doctors, hospitals, and other providers from taking advantage of the system. But its credibility as a referee on health care funding is undermined when its CEOs leave the company with gilded packages that make a mockery of the company’s nonprofit status.

© Copyright 2011 Globe Newspaper Company.