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Health-care honchos cash in

Nonprofit insurers all dole out big bucks to top execs

By Laura Crimaldi | Saturday, March 5, 2011 | | Local Coverage

Blue Cross Blue Shield — under fire for paying out an eye-popping $11 million severance to its ex-CEO — is hardly alone in the controversial practice of paying board members and rewarding top executives with hefty salaries.

The chief executives of the state’s four leading nonprofit health insurers all take home more than $600,000, and part-time directors earn an average of $47,653 annually — a practice criticized by medical and charity watchdogs.

“Nonprofit board members should get zippo,” said Pablo Eisenberg, a senior fellow at the Georgetown Public Policy Institute. “I think it’s egregious that someone gets $60,000 or $80,000 to do some charitable work, especially when they’re usually wealthy people who don’t need the money.”

This week, Blue Cross revealed it gave an $11 million payout to ex-CEO Cleve L. Killingsworth, who resigned after the company lost nearly $150 million.

Attorney General Martha Coakley is investigating the deal, and health insurers’ practice of paying board members.

“The high level of compensation is not the example to set when everyone, especially patients, are making sacrifices to address the costs of health care,” said Dr. Alice Coombs, president of the Massachusetts Medical Society.

The most generous board member compensation was paid out by the state’s largest insurer, Blue Cross, which doled out $56,000-$89,000.

The average board pay at Harvard Pilgrim, where directors get a $12,500 stipend, was $42,550. Board members are paid more than the stipend if they attend meetings and serve on committees, said spokeswoman Sharon Torgerson said. President and CEO Eric H. Schultz, who was appointed last March, earned $795,017.

The average director pay was $26,775 at Tufts Health Plan. President and CEO James Roosevelt Jr. earned $873,777, records show.

Fallon Community Health Plan gave the lowest pay to its directors, with its 10 board members earning an average of $18,497. President and CEO W. Patrick Hughes earned $649,581.

Blue Cross, Tufts and Harvard Pilgrim all defended their compensation practices. A Fallon spokeswoman did not return messages.

“We recognize that the community is concerned about compensation,” said Blue Cross Senior Vice President Jay McQuaide.

However, he said, “Blue Cross Blue Shield is in a very competitive marketplace. We compete for leaders with other similar organizations, many of which are national for-profit insurers.”

He added compensation represents a tiny fraction of the premium dollars paid by insurance customers: the total compensation for the 10 highest wage earners represents one-tenth of 1 percent of premiums, he said. Killingsworth’s successor, Andrew Dreyfus, earned $799,899 last year.

One expert agreed the standards for health insurance companies differ from those for other nonprofits.

“They have to be viewed a little differently,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “They’re competing with the for-profits for talent.”

Georgetown’s Eisenberg dismissed that argument.

“They are building up this myth that there’s a lack of talent out there — that to attract really good talent you have to pay huge sums of money,” he said. “It’s a total myth.”

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