Massachusetts health plans consider stopping directors' pay

Blue Cross Blue Shield of Massachusetts' 18-member board of directors has opted to work without compensation as public debate and scrutiny from the state attorney general is directed at how much the board and executives of nonprofit health plans are paid for work that goes unpaid at similar organizations outside insurance.

The Massachusetts Medical Society hasn't reached an official policy on the matter, but President Alice Coombs, MD, a critical care specialist and anesthesiologist who practices in Sharon, Mass., said in a statement, "The high level of compensation is not the example to set when everyone, especially patients, is making sacrifices to address the costs of health care."

State Attorney General Martha Coakley's investigation into board pay is part of increased attention to executive and director pay that the office announced in September 2009. That inquiry was prompted by a $16.4 million retirement package for former Blues CEO William Van Faasen in 2007.

In her Sept. 2, 2009, memo about directors' compensation, Coakley said, "If the practice is to continue at any of them, it should do so only on the basis of a sound and well-considered foundation, for which the benefits and risks have been fully explored and appropriately considered, and in a manner in which the independence of the board has been preserved."

Just after the attorney general's office began its inquiry, the Blues announced an annual loss of more than $149 million for 2009, and CEO Cleve Killingsworth agreed to resign in March 2010. He departed with an $11 million retirement package.

In a statement from the Blues' board released March 8, the directors announced that they understood public frustration about Killingsworth's severance package and the pay directors receive. They said they would forgo their pay "immediately and indefinitely" and reduced the current CEO's salary package.

The Blues' directors' pay ranged from $11,415 to $89,886 in 2010, according to filings with the state insurance division.

Coakley's office welcomed the move and called on the other nonprofit plans to follow suit.

That left leaders at Fallon Community Health Plan, Harvard Pilgrim Health Care and Tufts Health Plan to consider their next move.

Bruce McPherson, president and CEO of the Alliance for Advancing Nonprofit Health Care, a trade group of nonprofit health insurers, said the organization has no official position about whether directors should be compensated, but he thinks it's a good idea to pay them.

"Giving them some sort of compensation sets a tone where they will take their governance responsibilities seriously," he said.

Two members of the Tufts board were paid nominal amounts of $1,000 and $1,600, but pay for the others ranged from $19,500 to $82,500 in 2009, according to filings with the state.

"Our board is convening soon ... to decide whether or not they are going to continue in their current mode, or whether or not they're going to consider suspension of their current pay," said Tufts spokeswoman Patti Embry-Tautenhan.

In 2009, directors at Fallon were paid from $13,900 to $24,350, according to filings with the state. Fallon spokeswoman Christine Cassidy would only say, "We're evaluating our practices."

Pay for directors at Harvard Pilgrim Health Care ranged from $21,900 to $68,100 in 2010, according to filings with the state.

Harvard Pilgrim's board is "currently evaluating its policy of compensating its independent board of directors," spokeswoman Sharon Torgerson said in a statement.

"Our directors' time, knowledge, experience and commitment ultimately serve the public benefit by making Harvard Pilgrim the best health plan in the nation for our members," the statement said. "In our view, good governance is advanced by the recruitment and retention of experienced, independent, reasonably compensated directors that contribute integrally to the company's success."