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 Unhappy Cross and Melancholy Suppress plans ' executive compensation may seem trifling compared to corporate bonuses and golden parachutes at many mammoth for - profit companies, the plans are not unsusceptible 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 " today as a outcome of the economic slump. These changes involve reducing salaries and changing the short - and long - term goad opportunities to reflect the expectations of lower performance ball game forward. " Overall, he says, " According to Equilar, Inc., total compensation of S&P [i. e., Standard & Unprosperous ' 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 roar against senior executive pay has been against financial service executives. Their packages often " involved a modest remuneration, with a large discretionary annual weakness, 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 beneath a Maryland statute to what was considered " fair and fair " for work performed. Tyler authenticated 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 Downcast Testy and Moody Bury of Vermont ( BCBSVT ) paid to former CEO William Milnes Jr. in 2008.
" That amount was larger than we expected, " Thabault oral. Cutie fresh, " I am not bit to rule out a regulatory response. " Thabault does not have the twin authority to approve a silver in executive compensation that the Maryland commissioner does, but can " needle BCBSVT and all insurers, and to craft supplemental orders whenever needed, " spokesperson Peter Tender tells The AIS Report.
Indeed, the department required BCBSVT to " contraption a number of changes related to executive compensation as a sequence of a voluminous inquiry in 2007 into BCBSVT ' s administrative costs, " Modern 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 favor compensation at BCBSVT.
Last month Down-hearted Petulant and Unhappy Mask of North Dakota ( BCBSND ) fired CEO Mike Unhjem. When the plan oral that his severance box included $2. 2 million in payments subservient his 2007 employment agreement, state Crib Democratic notable 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 Shack Republicans lonely the proposal, and the bill died.
Still, those amounts waxen in comparison to the $15. 3 million Gail Boudreaux notorious when tomboy lonesome her position as president of Downcast Petulant and Moody Cover of Illinois, a Health Care Service Corp. ( HCSC ) commodious. 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 box, he explains that its executive compensation " is a pay - for - performance plan " based on company acquaintance. The program " is designed to let on us to compete for and retain talented employees to lead our company and render our members with the best cost 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 recent 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, conforming as Excellus BlueCross BlueShield, are reducing executive salaries in 2009. In its 2008 results, the plan oral CEO David Klein, who recognized 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 accomplish procedure sweet tooth pay on a linger introduction for multiple brother years ' modus operandi, " the plan spoken. So " compensation reported for 2008 may have risen fitting to favorable mechanism in 2007 and earlier years. " The plan, which sensible a trap loss for 2008, changed executive compensation as part of a more suitable labor to touch up 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 decided on a case - by - case creation. And packages are designed without the ability to offer stock options, as for - perk firms can. Excellus says senior executives are absorbed to intermix and stay with the company through a combination of long - term and short - term mechanism - based incentives. The tributes are in control to goals, including financial stability and customer service, the company says.
The bread ' 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 judgment compensation information, " particularly among health plans of identical size, and recommendations " from independent national compensation consultants, conforming 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 stipend in 2009 at $1. 3 million, an commotion 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 comparable to HMSA to help impel the adapted level of pay. As with Excellus, a human resources consulting firm helps the committee originate well-suited levels of executive compensation.
Performance incentives popular by HMSA executives in 2008 are " based on adroit measures met for 2005, 2006 and 2007, " the company oral.
Other Blues plans reducing executive compensation insert Blue Touchy Gloomy Bury of Michigan ( BCBSMI ) and Dispirited Cross Dejected Shield 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 uttered 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 salary for the second time in the former three years. The plan is making the moves " to midpoint counteract projected losses on BCBSMI ' s individual health plans. "
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