State regulators require health insurers to disclose executive pay as part of extensive annual financial filings used to monitor the companies' finances, but flexible reporting rules make it hard to compare pay practices at the 20 companies that filed the disclosures in Pennsylvania and New Jersey.
Still, the reports offer a rare glimpse behind the curtain at companies — especially firms that are not publicly traded, such as Independence Health Group and Horizon Blue Cross Blue Shield — that play a key role in consumers' lives and absorb an ever-increasing chunk of workers' own overall compensation.
Even in the case of publicly traded companies, the state insurance department compensation filings, compiled into a searchable database by The Inquirer, go deeper into executive ranks than the pay disclosures in proxy statements for publicly traded companies.
Given the power of stock-based compensation, it was no surprise that chief executives of publicly traded companies topped the Inquirer's list. The biggest compensation package in 2017 went to Bruce D. Broussard, CEO of Humana Inc., a Kentucky company that sells Medicare plans in Pennsylvania. Broussard's $33.4 million package included $29.6 million in stock and stock options.
The most glaring weakness in the filings from the perspective of assessing overall compensation practices is that the National Association of Insurance Commissioners' rules for the disclosures let the firm choose whether to make public executives' total pay.
Some make that disclosure. But others follow a different approach permissible under the disclosure rules. They list only portions of overall pay attributed to specific subsidiaries — and only the compensation paid by certain regulated subsidiaries at that.
Carmen Balber, executive director of Los Angeles nonprofit Consumer Watchdog, said such "allocated" pay disclosures are an example of the health care industry's lack of transparency.
"No consumer is able to find out what the price of their hospital procedure is going to be until they go to the hospital and get the bill. No one knows what prescription drugs really cost because the pharmacy benefit managers hide the ball and make those negotiations secret," Balber said. "This is just another example of opacity in health care spending that's helping drive up costs."
The confusion sown by the flexible rules is shown in the case of Diane Holder, president of UPMC Health Plan, a fast-growing insurer that has been expanding throughout Pennsylvania from its Pittsburgh base.
In its state filings, UPMC disclosed pay for her of $488,416 last year and $444,586 in 2016. Those were the totals from seven different legal entities regulated by the Pennsylvania Insurance Department. (The filling allocated $16 to her from one of the subsidiaries.)
However, UPMC's public tax returns shows that Holder's total compensation in 2016 was $3.68 million. (Figures for 2017 are not yet available). A spokesperson for the firm did not respond when asked to detail what other parts of UPMC paid Holder.
UPMC had $14.3 billion in operating revenue in fiscal 2017, including $6.8 billion from insurance operations. That was slightly more than from the patient-care side of the business.
Like UPMC, Capital Blue Cross, which provides services in 21 counties in the Lehigh Valley and Central Pennsylvania, was opaque on the filings. It only disclosed that chief executive Gary St. Hilaire was paid $1.9 million last year from five subsidiaries. The firm did not respond when asked whether the filings captured his total compensation.
No further information is available. Capital's tax returns are not public, and it is not publicly traded.
The two biggest Blue Cross Blue Shield companies with insurance customers in the Philadelphia region, Independence Health Group Inc. and Horizon Blue Cross Blue Shield of New Jersey, elected to be more transparent on the state form.
Robert A. Marino, the now-retired CEO of Horizon, made $5 million in 2017, Horizon revealed on the state filing. Independence Health Group CEO Daniel J. Hilferty was paid $4.8 million. Horizon had $13.3 billion in revenue last year. Independence's revenue was $16.4 billion.
Another problem with the information reported to the insurance departments is that sets of executives included in the filings are not comparable because some companies include their overall CEO and others don't.
Aetna Inc. and Humana Inc., two major publicly traded firms, included their CEOs in the state filings. Aetna's Mark T. Bertolini was second, behind Humana's Broussard, with $18.8 million in total pay.
But three other major publicly traded firms, UnitedHealth Group Inc., Centene Corp., and Cigna Corp., did not include their overall CEOs in the filings, although their proxy filings show that their pay ranged from $17 million to $25 million.
Highmark Inc. and UPMC, each of which have both hospital and insurance operations, also did not include their CEOs in the state filings.
However, UPMC's public tax returns report that Jeffrey A. Romoff was paid $6.1 million in 2016. The same document from Highmark Health, which is described as "the parent entity of an interdependent health-care system," says CEO David Holmberg made $2.6 million in 2016.
It's not clear if that was his total pay at Highmark, which had $18.2 billion in 2016 revenue, including $2 billion in net patient revenue, according to its consolidated financial statement.
Under a bill introduced last year in the Pennsylvania General Assembly, insurers would have to make an additional annual filing on their corporate governance practices. "These filings detail more how the company is managed, and will afford the Insurance Department the opportunity to delve deeper into officer compensation," spokesperson Ronald G. Ruman said.
Regulators in Pennsylvania have never objected to an individual insurance executive's pay. "This is just one part of a company's expenses and the overall financial health of the company is what is considered when making sure the company is solvent, and that consumers' claims will be paid," Ruman said.
The New Jersey Department of Banking and Insurance, which recently started making health insurance filings easily accessible on its website, said it has objected to executive pay, but would not give details because financial examinations are confidential.