Blue Cross buyer pays huge executive bonuses, will keep pay secret

2013-04-17T00:00:00Z 2013-06-27T11:44:07Z Blue Cross buyer pays huge executive bonuses, will keep pay secretBy MIKE DENNISON Gazette State Bureau The Billings Gazette
April 17, 2013 12:00 am  • 

HELENA — Top executives of Blue Cross and Blue Shield of Montana received big bonuses in 2012 — but their payments are chicken feed compared to bonuses paid to executives who run the health care giant planning to buy Blue Cross.

And, if the merger goes forward, 2012 could be the last year that Montana Blue Cross policyholders get to know how much Blue Cross of Montana pays its top executives.

Mike Frank, CEO and president of Blue Cross of Montana, had $635,000 in total compensation for 2012, according to records filed with the state, including a $213,000 bonus.

Blue Cross of Montana reported $10 million in underwriting losses last year — a year after having $5.4 million in losses.

Chicago-based Health Care Services Corp. (HCSC), which is proposing to buy Blue Cross of Montana, paid its CEO Patricia Hemingway Hall a total of $16 million in 2012, including a whopping $14.9 million bonus. HCSC is the fourth-largest private health insurer in the nation.

HCSC reports the salary and other compensation of its top 10 officers to the Illinois Department of Insurance. Its filing for 2012 shows that those top 10 executives received a total of $53 million in bonuses for that year, and that their individual compensation ranged from $3.16 million to Hall’s $16 million.

But those 10 executives did not include HCSC’s divisional directors in New Mexico or Oklahoma, which are small- and medium-sized Blue Cross plans owned by HCSC.

If HCSC acquires Blue Cross of Montana, its Montana divisional director is not likely to be among the firm’s 10 top-paid executives — and therefore, his or her salary may not be public information.

HCSC spokesman Greg Thompson said the company doesn’t release salary information on any employee unless that release is required by law.

Under Montana law, the state’s nonprofit health insurers publicly report the annual compensation of their top executive officers. However, if Blue Cross merges with HCSC, it will become a division of an Illinois company, and may not be subject to Montana’s reporting laws.

The state auditor and attorney general are scheduled to file recommendations Friday on whether the merger should be approved.

Blue Cross of Montana last month filed its report on compensation for its top executives and board members for 2012.

Its top five officers received bonuses ranging from $62,000 to Frank’s top bonus of $213,000. Their base salaries ranged from $168,000 to Frank’s $385,000, which was the same salary he was paid in 2011.

With his bonus, Frank earned about $121,000 more than he did last year in total compensation, a 23 percent increase over 2011.

Executives for HCSC, which has 13.2 million customers, received huge bonuses in 2012, and their total compensation increased anywhere from 36 percent to 140 percent over 2011. The vast majority of the increases came from bonuses.

Thompson said the health insurance industry is “in one of the most transformative periods that the industry has ever faced,” and that it needs to recruit and retain top talent to deal with the dramatic changes occurring under the Affordable Care Act.

He also noted that HCSC has added more than 1 million members since 2010, and that the compensation it pays its top executives is a mere fraction of its overall gross revenue of $52 billion last year.

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