Lifestyles Of The Rich And Famous Insurance CEOs
Matt Kapp has a great piece on the salary structure in the health industry, including the insurance companies. It's really mind-blowing to see these numbers.
With median annual compensation of more than $12.4 million, C.E.O.’s at the big health-care companies make two-thirds more than their counterparts in finance and are the highest paid of any industry. The health-care industry’s total annual profit has grown to an estimated $200 billion, and it doled out nearly $170 million in campaign contributions in 2007 and 2008. It now spends more than any other industry lobbying the federal government—$3.5 billion over the past decade and a record $263 million in the first six months of this year. That’s six lobbyists and nearly half a million dollars for each member of Congress. It’s been a good year on K Street, too [...]
Gambling investors’ money on exotic securities in pursuit of outsize returns may be a dubious profit model, but what could be worse than the health-insurance industry’s core model: screwing sick people to boost margins. President Obama has taken aim at big health-insurance companies and their “record profits.” While it’s true they’ve managed to more than triple their profits over the last eight years, they’ve still only lifted their average margin to percent, enough to place 87th out of 215 industries. But they shouldn’t be complaining about lackluster profits when they’re paying their C.E.O.’s and executives as extravagantly as they are. Dishing out this much scratch, it’s a wonder they’re making any profits at all: Aetna C.E.O. Ronald Williams has helped purge millions of members from the company’s rolls; his total annual compensation in 2008 was $24,300,112. Angela Braly, who has promised that WellPoint “will not sacrifice profitability,” also saw a raise, to $9,844,212. Cigna’s Edward Hanway saw his pay cut in half and still hauled in $12,236,740, but he was forced to manage a major P.R. crisis after the company initially refused to approve a liver transplant for a 17-year-old girl, which it said was “outside the scope of the plan’s coverage.” She died just hours after Cigna changed its mind and decided it would pay for a new liver after all. Despite a 75 percent pay drop in 2008, cutting him down to a humiliating $3,241,042, UnitedHealth Group’s Stephen Hemsley put on a brave face for Congress, assuring legislators: “Our mission at UnitedHealth Group is to help people live healthier lives.” UnitedHealth has been fined tens of millions of dollars for claims-processing violations (i.e., stiffing patients and doctors). Hemsley’s predecessor, William McGuire, resigned amid a stock-options backdating scandal in 2006. He still walked away with nearly half a billion dollars in stock options. Hemsley surrendered $190 million in options himself, but with $744,232,068 left over, he should be fine.
Even C.E.O.’s at “not-for-profit” insurance companies (like most state Blue Cross and Blue Shields) collect multi-million-dollar compensation packages, even as their companies pay little in the way of taxes. Blue Cross of Massachusetts’s C.E.O., Cleve Killingsworth, got a 26 percent raise in 2008, to $3.5 million, and Blue Cross of North Carolina’s C.E.O., Bob Greczyn, pulled down nearly $4 million after a 19 percent raise. Gail Boudreaux left Blue Cross of Illinois in December 2007 with $15.3 million. The not-for-profits can be just as freewheeling with expense accounts. In early September, a state audit found that Blue Cross of North Dakota used premiums to pay for a $238,000 sales managers’ retreat in the Cayman Islands and a $34,814 retirement party for an executive.
It's just as bad for the CEOs of hospital operators, lab companies and drugmakers. But I want to loop back to the insurance industry. Defenders always latch on to that 3.4% profit margin to cry poor for the insurance industry. That is a meaningless statistic. In the first place, 3.4% on one-sixth of the US economy, approximately all the insurance premium pass-throughs, is a staggering number. In the second, those profit margins do not include these pay packages. Salaries and compensation fall into the category of operating expenses.
These are the same insurance executives who told Congress this week that denial of insurance claims could be fatal.
It's not hard to make the connection. CEOs take home millions upon millions in take-home pay. They maximize profits and expand their pay packages by paying as little in claims as possible. They admit that this denial of care can lead to fatalities. The dots connect themselves.
When WellPoint CEO Angela Braly was questioned on the immoral practice of denying coverage and dropping customers, she lied so blatantly that even Maria Bartiromo had to correct her. Yes, THAT Maria Bartiromo.
HAINES: I believe you just said very cleverly worded 87 cents of every premium dollar goes to the delivery of healthcare. But in fact why don’t we look at your, the amount of payments you make per dollar you take in. It’s more like 80 cents, is it not? You pay 80 cents in benefits for every dollar. [...]
BARTIROMO: According to your 10k, the number is more like 80 or 81 cents.
BRALY: Yeah I’m citing a Pricewaterhouse Coopers study for the industry overall. 87 cents on the dollar is going to healthcare costs, in the industry–
HAINES: Well there you go again, that’s too cleverly worded. Going to healthcare costs? [...]
BRALY: Relative to other margins in the healthcare industry — biotech’s at 18, pharma’s at 16 — you know really we’re a low cost, low margin provider in the healthcare equation.
The excuses are pitiful, and the game is clear. Insurance companies make money off of studiously ignoring your well-being.