Halting Board Member Pay, Blue Cross Ponders Nonprofit Status

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The Blue Cross Blue Shield of Massachusetts Board of Directors on Tuesday voluntarily agreed to indefinitely suspend its members' compensation. In total that amounts to more than $1.2 million a year.

The payments for the 18 board members make up a fraction of the $13 billion company, but the board says it heard clearly the community's anger at the board payments and the severance package to former CEO Cleve Killingsworth. The new CEO, Andrew Dreyfus, says the board wanted to show it's acting responsibly.

"The board really wanted to move the discussion back to talking about health care affordability and this issue really had become too much of a distraction," Dreyfus said. "They really wanted to send a message that there's a new era of Blue Cross and we are going to be more modest in our compensation practices."

Dreyfus says most Blue Cross boards across the country pay their members and do it because they need to attract people with business and financial expertise.

Board members here include Massachusetts AFL-CIO President Bob Haynes, who was paid $72,000 last year, and Helen Drinan, the president of Simmons College, who was paid $84,000. Some members received free health care as part of their compensation. Paul Guzzi, CEO of the Greater Boston Chamber of Commerce, received $84,000 for sitting on the board, but says with his business experience, he brought value.

"The combination of experiences and understanding of finances and a deep commitment to improving the health care system here in Massachusetts were all criteria that led to me going on the board," Guzzi said.

Attorney General Martha Coakley, who is investigating Blue Cross for its payout to Killingsworth and had inquired about board pay, applauds the decision and says the other three nonprofit health insurance companies in the state should reevaluate their practices of paying board members as well. Tufts Health Plan says it is looking at the practice. Harvard Pilgrim Health Care and Fallon Community Health Plan did not return a call for comment.

Blue Cross says in addition to suspending pay for board members, it's starting to examine whether it should even be classified as a public charity. Dreyfus says it creates unrealistic expectations.

"We are a not-for-profit organization, but on the other hand we need to act as a business, we need to act competitively in a market," he said. "We are a large financial enterprise and I think that creates some confusion in the public's mind — are we a business or are we a charity?"

Blue Cross doesn't accept donations and already pays taxes. Dreyfus says the board will explore another way to be classified. But it is not considering becoming a for-profit insurer. Coakley says it's a good opportunity for Blue Cross to explore a change.

"For Blue Cross Blue Shield it would require a statutory change, but it's never inappropriate for a board of an institution to at least review and consider — should they be organized some other way," Coakley said.

The board says as long as there are conflicting expectations about who Blue Cross is, and how the insurer should behave, there will be questions about compensation and other business practices.

This program aired on March 9, 2011.


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