In 2013, while working for Blue Shield of California, I learned that Bruce Bodaken, who’d resigned the previous year as CEO, was paid $20 million when he left. I’m writing about it now because the undisclosed payment epitomizes the lack of public accountability at the nonprofit that I’ve sought to spotlight with this blog since my resignation this spring.
I don’t know the details of the payment. It could have been a golden parachute of some sort. Or perhaps it was pension related. Whatever it was, it came on top of a salary that reached north of $4.5 million.
An $11 million payment in 2011 to the departing CEO of Blue Cross Blue Shield of Massachusetts, also a nonprofit, sparked a public uproar and investigation by that state's attorney general. In response, the insurer rebated over $4 million to its policyholders.
Almost as disturbing as the payment itself is Blue Shield’s concealment of it. Secrecy is standard practice for the organization when it comes to executive compensation. Every other major health plan in California—Anthem Blue Cross, Kaiser Permanente, Health Net, United Healthcare, Cigna, and Aetna—annually discloses details of executive pay, including pension amounts. But not Blue Shield.
The nonprofit’s lack of disclosure violates not only its duty to the community, but government regulations, as well. Under California health reform implementation rules, insurers are required to file specified information for review by regulators and the public before increasing rates. That information includes the “annual compensation of each of the 10 most highly paid officers, executives, and employees.”
Blue Shield has complied with the rules only occasionally and never fully. More than half of its rate increase filings since adoption of the rules contain no information at all about executive compensation.
The other filings have only partial information. In those, Blue Shield has reported a single figure for each executive, which it describes as the “the total amount received." The reported amounts, however, exclude compensation other than salaries and bonuses, such as pension contributions.
Details on these compliance failures are here.
In its advertising and PR messaging, Blue Shield describes itself as “for community.” But it's clear from the extravagance and secrecy of their pay that the people running Blue Shield answer only to themselves.
Regulators shouldn't let them get away with that. The California Department of Insurance and Department of Managed Health Care ought to insist on Blue Shield's full compliance with the disclosure rules. They should make the plan publicly report all elements of executive compensation paid since implementation of the rules, starting with the details of the exit payment to Bodaken.
9/1 Update: The LA Times has a front page story about this today.