Editorial: Blue In The Face
Is there any industry that's more maligned than the health insurance industry?
That's been the case for many years, but never more so than in the last few, when double-digit premium increases have sent business owners over the edge in frustration.
That context is useful in understanding the latest outrage du jour centering around the state’s largest health insurer, Blue Cross & Blue Shield of Massachusetts.
Sweet So Long
First, there was the news of Cleve Killingsworth’s golden parachute — an $11-million package, including salary for 2010 and severance. Killingsworth left Blue Cross Blue Shield in March 2010. His compensation came to light through filings with the state Division of Insurance.
That total pay certainly seems exceedingly generous for the outgoing CEO of a nonprofit and would be pretty decent even for the head of a for-profit publicly traded company.
The Killingsworth package was enough really, but then we got wind that directors of the nonprofit HMO were making anywhere from $60,000 to nearly $90,000 in 2010 to advise the organization.
That was an embarrassment to be sure, especially for Robert Haynes, president of the AFL-CIO, and George Alcott III, vice president of the AFL-CIO, who both earned healthy compensation packages as part of their service to the HMO.
Not surprisingly, union members were not happy that two people who were supposed to be defending the worker’s interest were cashing checks from the state’s largest HMO. In fact, the New England Police Benevolent Association has demanded the pair return any compensation they’ve received from Blue Cross Blue Shield.
In the eye of all this scrutiny, Blue Cross Blue Shield has suspended pay for its directors. That falls in line with recommendations from Attorney General Martha Coakley, who issued a statement noting that “compensation of board members at public charities is extraordinarily rare in Massachusetts and for good reason.”
True To Mission
That reason, of course, is that a nonprofit gets the benefits of being a nonprofit for a purpose. Nonprofits don’t have to pay taxes because they are supposed to be fulfilling some greater community good. Now that doesn’t mean that they should be money losers. Far from it. Good nonprofits, and there are many, are run like self-supporting businesses. And good executives at nonprofits need to be compensated fairly, lest they leave the nonprofit sector for a higher paying job at a for-profit.
But the mission of a nonprofit is not to create dividends for its stockholders, as it is at for-profit businesses. For a nonprofit, there are no stockholders, there are only stakeholders — those members of a community that have a stake in the mission of the organization. In the case of Blue Cross Blue Shield, more than 3 million people are members and therefore stakeholders in the organization.
We're not naïve. We get that Blue Cross Blue Shield isn't your average little nonprofit. We also understand the demands put upon board members. The time it takes to be a valuable board member can feel like a full-time job. And of course, we also understand that board members of large for-profit companies can make far more than $70,000 a year for what may amount to less work.
But Blue Cross Blue Shield is not a Fortune 500 company. It’s a nonprofit health insurer. If it wants the benefits of nonprofit status, it should start acting like one, and put its stakeholders — those 3 million members — first and its funding of overly generous compensation packages to board members and outgoing CEOs somewhere far below.
And while Blue Cross Blue Shield does that work, we also support the work of the Attorney General and state legislatures to look more closely at the issue of nonprofit executive and board compensation. There’s no need for a witch hunt — the majority of nonprofits are staying on mission and providing real economic value in support of some of the region’s most struggling communities. But a case such as Blue Cross Blue Shield is a powerful reminder that there are opportunities for abuse within the nonprofit sector and it’s the job of leaders such as Coakley to monitor those organizations and push for reforms when necessary.
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