Page: 3 of 3 View All
Top salaries key to approval of Blues merger
When Maryland's Blue tried to merge with WellPoint Inc., of California, the deal called for a whopping $39 million in bonuses and severance for the Blue's chief executive. Maryland's insurance regulator, Steven B. Larsen, said the transaction was "inappropriately influenced by the prospect of large payouts for some individuals." He killed the deal.
In another case that has generated criticism, the chief executive of Anthem, which owned Blue plans in eight states, saw his pay climb from $2.2 million to $30 million in the years after Anthem switched to for-profit status.
To be sure, most of that was in the form of stock, a pay option that will not be available to Melani or Frick. The two Blues in Pennsylvania have pledged to stay nonprofit after they consolidate.
Among nonprofit Blues, the highest-paid chief executive last year was the head of Health Care Service Corp., which runs Blue Cross plans in Texas and three other states. According to the latest survey by the AIS Report, a health-care newsletter, its chief executive was paid $5.8 million.
Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.
Substantial taxes
Despite the nonprofit status of their parent companies, the Pennsylvania Blues still pay substantial taxes, the firms point out. Congress wiped out the federal tax exemption for Blues 25 years ago, although both Highmark and Independence do still get some breaks in state taxes. According to the firms, Highmark enjoyed a state tax reduction of $80 million last year, based on its nonprofit status. Independence got a break of $9 million. Even so, after the tax breaks, Highmark still paid a total of $240 million in taxes last year. IBC paid $170 million. "Yet our competitors refer to us as though we have some extraordinarily privileged situation," Williams said. On top of the taxes, the insurers note, they also put up a combined total of $205 million last year to subsidize health care for the poor and to pay for other charitable initiatives. Nonetheless, U.S. Sen. Arlen Specter (R., Pa.) pushed Melani on the pay issue at a public hearing in April, shortly after the proposed deal was announced. Specter asked Melani how he squared his compensation "in excess of $3 million . . . if nonprofit really has to have some significance in terms of not being for-profit." Melani reddened. Then he pointed out that Highmark serves 28 million people nationally, including the 4.6 million insured in Pennsylvania. "So," Melani said, "if you were to charge our customers for my compensation . . . it would be about 10 cents per customer per year."Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.
