WBUR

Departed Blue Cross CEO Nets A Total Of $11.3M

BOSTON — Blue Cross Blue Shield of Massachusetts released details Tuesday of an $11.3 million compensation payment made to its former CEO, Cleve Killingsworth, when he agreed to leave the company last year.

Here’s how the deal breaks down: Killingsworth received $8.6 million last year, most of which was his retirement benefit. A remaining $1.4 million was the first of three severance payments, and he’ll receive two more severance payments for a total of $11.3 million.

We asked Blue Cross Senior Vice President Jay McQuaide how the company could justify this expense at a time when rising health care costs are one of the state’s most pressing problems.

“There’s no questions that this is a significant amount of compensation and we would be the first to recognize that,” McQuaide said. “We also understand that affordability is the central issue facing the community today and that we need to lead by example.”

That example, McQuaide says, is a less generous payment package for current CEO Andrew Dreyfus. His base salary is 25 percent less than what Killingsworth earned and the company is reducing the retirement and severance packages as well. But that attempt to say “we’ve learned our lesson” isn’t persuading some critics.

“This kind of compensation package is outrageous, it’s inappropriate and it’s one of the exact reasons why health care costs are skyrocketing,” said Dierdre Cummings, the legislative director for MASSPIRG. “[It] leads the public to lose faith that we can actually be serious about driving down the cost of health care.”

“Frankly I think they lose all credibility that they are struggling financially when they grant these packages,” said Jon Hurst, president of the Retailers Association of Massachusetts. Hurst says this deal is out of line with the state of the economy.

“We’ve gone year after year with double-digit premium increases for small businesses and working families in a very tough economy,” Hurst continued, “and we think the health care industry needs to better reflect what’s happening in our economy.”

Many low-wage health care workers are also angry. Jeff Hall, spokesman for 1199 Service Employees International Union, says this deal is frustrating at time when members are making sacrifices to control costs.

“This sends a troubling message from the insurance industry,” Hall said, “and somebody ought to take a closer look given the situation around costs, it’s troubling.”

Attorney General Martha Coakley said in a statement, “While Blue Cross may be required to meet its contractual obligation to its former CEO, we continue to be concerned about high levels of executive compensation at health care organizations given current fiscal condtions and efforts to control costs in health care.”

The Patrick administration says it is reviewing the deal to see if it warrants further scrutiny or action.

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  • SD

    Appalling anyway.

  • Earlebatchelder

    “significantly reduced compensation and benefits ….for Dreyfus”? And Dreyfus” compensation is…8.6 mil? Is that the best the Board can do? Puh-leeze!!!

  • Aviva

    FTA: “Frankly I think they lose all credibility that they are struggling financially when they grant these packages,” said Jon Hurst, president of the Retailers Association of Massachusetts. Hurst says this deal is out of line with the state of the economy.

    There seems to be a confusion of cause and effect here. They are struggling financially as a result of having to pay this compensation package–this instance does not negate but rather further confirms their claim of financial struggle (although, they did net positive profits). Despite the state of the economy, the company still has to make good on its contract. This money is owed, most of it is a retirement package. Perhaps the severance is a bit steep though…

    Slightly off topic, but personally, I would like to see more fury about compensation for athletes, who by the way are still paid hundreds of millions in spite of the state of the economy. Their salaries make this deal look like pocket change.

  • Harvey

    I imagine that top administrators working for Medicare and Medicaid make a bit less. One more reason for a goverment operated single payer system.

  • Suzannepc1

    This is definitely outrageous and supports the suspicion that we all have that there would be nothing wrong with our economy if the people at the top had not been milking us dry for years… somthing like Gadhafi and Mubarak.
    Suzanne

  • Anna

    Stop the madness! Coverage is not care. We all have bodies and they all, cradle to grave, need maintenance. Insurance has nothing to do with it. We need single-payer and we need it now. HR 676, the Expanded and Improved Medicare for All Act, will eliminate the 31 cents on every dollar wasted on private health insurance bureaucracy, the parasitic middlemen that enrich their execs, increase costs for the rest of us and deny or delay care to patients. HR 676 will implement a single-payer system that will capture the savings and deliver comprehensive, high quality health care to everyone….at a savings of $400 billion ANNUALLY.

    Rep. John Conyers reintroduced HR 676 just a few weeks ago. Single-payer healthcare, as proposed by HR 676, the Expanded and Improved Medicare for All Act, would do a lot towards ending state fiscal crises across the US and will put an end to ever-increasing healthcare costs.

    It’s time. No more ‘it’s not politically feasible’ excuses!

    http://www.healthcare-now.org/hr-676/

    http://www.pnhp.org/news/2005/november/1_in_5_health_care_d.php

  • Scroggil

    I’d like to know the compensation schedule for the upper echelon of Blue Cross Blue Shield management. I would doubt the excess starts and stops with the CEO. My co-workers in town government are hoping that FY12 health insurance increases will not totally cancel out merit-based increases, the only kind of wage increase left on the table. Many of them will retire with a pension that just barely covers their health insurance cost.

  • D Joanna

    As a contracted provider (clinical social worker) with Blue Cross for many years, working with children and families, I was informed that they were chopping the amount they pay for my services to families by $10 an hour beginning in Sept. 2010, easily “breaking” their contract with individual providers. Since I already accept a 50% reduction in payment by being contracted with them, my only recourse might be to join other providers in stepping back out of “managed care” and work only with families who can afford my full fee and don’t need to use their insurance! I don’t want to do this, (and won’t because of my own ethics and commitment to working with families who work hard for a living and need to use their health insurance), but it’s appalling to see the wealth for one individual CEO taking such a huge share of our health care dollars (at the same time that most co-payments for people with health insurance have risen to $25-$30 per counseling session at a time when many are struggling with low wages, unemployment, fear of losing their homes…..! “The rich get rich, and the poor get poorer” is getting played out in startling ways — it seems that those at the top are protected from having to sacrifice anything, even paying higher taxes, by those who are in positions of political power literally bought by the “Moneyed Class”! As long as Health Care is in fact an “industry”, geared towards profit-making, it seems this appalling economic divide is only going to get worse.

  • xray

    While I can accept the reasoning, but object to the amount spent, for getting exceptional talent to head up a company, I cannot understanding the reasoning for paying a huge ($13,000,000) bonus for LEAVING. What value is there in that payment other than gratuitous enrichment to the departing officer?

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