Skyrocketing salaries for health insurance CEOs

If health insurance companies announce big premium increases on policies for 2015, I hope regulators, lawmakers and the media will look closely at whether they are justified, especially in light of recent disclosures of better-than-expected profits in 2013, rosy outlooks for the rest of this year and soaring CEO compensation.

Almost all of the publicly traded health insurers reported big increases in revenue and profits last year. The big winners have been the top executives of those companies, led by Mark Bertolini, CEO of Aetna, the nation’s third largest health insurer. Bertolini’s total compensation of $30.7 million in 2013 was 131 percent higher than in 2012.

If the stock prices of these firms keep growing at the current pace, Bertolini and his peers can expect to be rewarded even more handsomely this year, especially if they can hike premiums high enough to satisfy shareholders.

According to Health Plan Week, a trade publication, the CEOs of the 11 largest for-profit companies were rewarded with compensation packages last year totaling more than $125 million.

Over the past several weeks, several of them have told shareholders and Wall Street financial analysts that their companies likely will have higher profits at the end of this year than they expected, despite having to pay more medical claims as a result of the new Obamacare customers they picked up.

Those announcements have been music to the ears of shareholders, who are considerably wealthier today than they were this time last year.

Of those 11 companies (Aetna, Centene, Cigna, Health Net, Humana, Molina, Triple-S Management Corp., UnitedHealth Group, Universal American, Wellcare, and WellPoint) nine saw their stocks close near 52-week highs this past Friday.

The biggest gainer has been Humana, one of the largest operators of Medicare Advantage plans, whose share price has increased more than 53 percent over the past year.

The increases have been equally impressive at most of the other big companies. Aetna’s share price is up 31 percent, Cigna’s 32 percent. United’s is up 28 percent. And WellPoint’s is up 39 percent.

But it is the CEO compensation that has been the most eye-popping, especially at two of the publicly traded companies that specialize in managing Medicaid enrollees in several states: Centene and Molina.

Centene’s CEO Micheal Neidorff saw his compensation increase 71 percent last year, from $8.5 million to $14.5 million. Even more impressive was the 140 percent raise Molina’s J. Mario Molina got. His compensation jumped from $4.95 million in 2012 to $11.9 million in 2013.

All of those totals were disclosed in the proxy statements those companies filed with the Securities and Exchange Commission earlier this spring.

When I handled financial communications for Cigna, the day I dreaded most every year was the day we filed the company’s proxy. That’s because I knew I would get calls from reporters wanting to know how we could justify paying the CEO so much when most other employees were lucky to get 3 percent raises.

I always had talking points drafted with plenty of help from the company’s lawyers and HR executives. They didn’t vary much from year to year. Basically, all I said was, hey, this is a very big company, the CEO has a very big job and his pay is in line with what other firms of similar size pay their top guys.

I made frequent use of those talking points the first couple years. But toward the end of my 15 years at the company, I would rarely get more than one or two calls. By 2008, the year I left, the phone didn’t ring at all, at least not from the media. Fewer and fewer reporters even bothered to look at the proxy statements.

Chances are you are learning for the first time right now just how much the CEOs of big health insurance companies make. Unless you subscribe to Health Plan Week, it’s not likely you will stumble across their salaries. Nor it is likely that many members of Congress have subscriptions to Health Plan Week. That’s a shame, because they probably haven’t seen this quote, attributed to Paul Dorf, managing director of Compensation Resources Inc., from the May 19 edition, in reaction to insurers’ increasingly stratospheric CEO pay:

“I think what is going to happen is that the government is going to be stepping in. I really foresee it. As this stuff becomes public and more of the media recite these numbers, I think people are going to go to their legislators … This is crazy.”

I agree. But I’m not holding my breath waiting for the media to recite those numbers. Or for Congress to pay any attention to the outsized paychecks those CEOs are demanding — and getting — even though by law we now have to buy coverage from those companies.

HME Billing Service
Provider of Professional
HME Billing Services

HME Billing News Feed:

DME Billing Services MedBill Twitter 
DME Billing Service News
DME Billing Services MedBill Twitter 

Retrieved From: