CEOs of top health plans rake in up to $20 million

Some of the chief executives at the country's seven largest publicly traded health insurance companies saw their own economic recovery in 2010, earning total compensation from $6.1 million to more than $20 million.

Executive pay at the largest health plans didn't follow any broad pattern, though some executives saw dramatic pay increases compared with 2009.

That wouldn't be unusual in the context of all large corporations, said Aaron Boyd, head of research at Equilar, an executive compensation consulting and research firm in Redwood City, Calif.

"What we saw, at least at big companies, was that pay was up in 2010," he said.

Compensation for executives of health plans was toward the high end of all large corporations, but the increases in 2010 were slightly lower than in some other industries, Boyd said.

The average total compensation at 299 of the companies in the S&P 500 Index was $11.4 million, according to the annual AFL-CIO analysis of executive pay. The average total compensation was $4.8 million for insurance carriers included in that analysis.

As has been true in the past, 2010 base pay for most chief executives at major health plans hovered around $1 million, but incentive pay, retirement and pension contributions and stock awards made their total compensation packages worth far more.

The base pay is a result of rules that made up to $1 million in CEO pay tax-deductible for most companies. As part of the Patient Protection and Affordable Care Act, which became law in March 2010, only $500,000 of any executive's compensation is tax-deductible, and that total includes any money earned in one year but not paid out until future years. Performance-based pay is no longer deductible.

The bulk of most compensation for CEOs of health plans rests in stocks and stock options, tying compensation to the value of shares in the company, and, in theory, aligning a CEO's incentives with what's in the interest of shareholders.

The bias toward equity-based compensation doesn't mean, however, that CEOs of the most profitable companies made the most or saw the largest pay raises. Jumps in pay didn't necessarily mirror huge increases in profitability or revenue in 2009 or 2010.

According to SEC filings covering 2010, two CEOs saw their compensation more than double from 2009: Health Net's Jay Gellert and Cigna's David Cordani. Health Net saw a dramatic improvement in profit in 2010 from 2009, going from a loss to a $204 million net profit. But Cigna's profits were up only about 3% year over year.

Gellert's total compensation jumped from $3.6 million in 2009 to $7.6 million in 2010, Cordani's from $6.7 million to $15.2 million.

The highest-paid chief executive of the seven largest shareholder-owned plans was on his way out the door: Aetna's Ronald Williams retired as CEO on Nov. 29, 2010, and as chair on April 8. He made a total of $20.7 million in his last year as CEO, $14 million of it in stock awards.

But not all health plan CEOs received a compensation increase in 2010. Aetna's Mark Bertolini, who took over for Williams after serving as president for several years, received stock awards and options worth less in 2010 than in 2009, resulting in a 30% drop in total compensation, to $8.8 million. Humana's Michael McCallister saw a slight drop in total compensation, from $6.5 million in 2009 to $6.1 million in 2010.

Coventry Health Care's CEO Allen Wise also earned more in stock options in 2009 than in 2010, so his total pay was down to $13.6 million in 2010.

Compensation for Angela Braly, who heads WellPoint, the largest health plan by membership, rose slightly, from $13.1 million in 2009 to $13.4 million in 2010. Stephen Hemsley, who heads UnitedHealth Group, the largest health plan by revenue, earned $10.1 million in 2010 compared with $8.9 million in 2009.