Enrollment and profits fell, yet salaries rose
April 9, 2009 -- Despite these turbulent economic times, the majority of Oregon’s insurance executives took home heftier paychecks last year, while watching their company’s profit margins and enrollment shrink.
All told, Oregon insurers lost nearly 300,000 members last year (2,265,850 vs. 1,966,244). Those results became evident after the Insurance Division released the 2008 financial reports in early April. Insurers are required to report executive salaries, enrollment, premiums collected, surplus and the amount of money spent on medical care, pharmaceuticals and administration. (Note: A summary of those reports appears below.)
Only one insurer -- PacifiCare of Oregon (owned by the for-profit UnitedHealth Group) -- managed to survive the economic turndown, earning a double-digit profit margin (10.7 percent), while spending less on medical expenses than any of its competitors. PacifiCare focused on its Medicare Advantage Plan -- Secure Horizons -- and insured a limited number of individuals and small groups.
Mark Ganz, CEO and president of Regence BlueCross BlueShield of Oregon, walked away with the top salary during 2008, earning $872,665, which included a $535,212 bonus. In 2007, his combined salary and bonus was $787,040.
Similar to most health plans, Regence dipped into its $552 million in surplus to combat growing medical costs, while its membership slid by 32 percent after ODS Health Plan and Providence captured the public school teachers’ contract. The Oregon Educators Benefit Board turned down Regence's high-priced bid proposal.
Regence wasn’t alone in rewarding its top executive. Kaiser gave its regional president Andrew McCulloch a 59 percent salary increase, paying him $691,830, including a $142,049 bonus. McCulloch oversees Kaiser’s northwest region, which covers Oregon and southern Washington (Longview, Kelso and Vancouver). Kaiser's profit margin dipped slightly with membership and medical expenses holding steady.
The salary and bonus of Majd Fowzi El-Azma, president and CEO of LifeWise, climbed by 27 percent -- $360,848, despite a 32 percent drop in membership, while the insurer's net income and profit margin fell deeper into the red.
Lower profit margins also impacted HealthNet, which saw its medical expenses jump by 15 percent without a significant change in membership. Its CEO, Chris Ellertson, had a 16 percent salary boost, earning a salary and bonus of $248,639. Cynthia Moore, sales manager, saw her salary drop by 34 percent to $143,815.
Just one health insurer tightened its belt -- PacificSource. Despite a 14 percent membership drop and a decreased profit margin, all of its top executives reduced their take-home pay starting with CEO Kenneth Provencher. His salary went down 7 percent, to $372,184. Dr. Steve Marks, vice president and chief medical officer, took a 10 percent decrease, earning $275,396. Sujata Sanghvi, executive vice president and chief operating officer, made $252,926 (-6 percent). Their bonuses were modest as well. Provencher’s salary included a $24,771 bonus; Marks, $18,175 and Sanghvi, $16,685.
ODS experiences stunning growth
Despite the overall decline of insured Oregonians last year, Providence and ODS Health Plan beat the trend, gaining new members. ODS grew by a record 33 percent after garnering the public school teacher contract along with Providence.
The spike in membership led to much lower profit margins for ODS and Providence, but neither had to dip into their reserves. After gaining nearly 60,000 new members, ODS experienced a 28 percent increase in medical costs, and pharmaceuticals grew by 19 percent. Its CEO, Robert Gootee, receives a salary from both ODS Health Plan and Oregon Dental Service. Together with bonuses, he earned $668,188, representing a 16 percent increase. Jonathan Jurevic, treasurer, saw his salary grow by 29 percent, reaching $296,650, including a $87,120 bonus.
Jack Friedman, CEO of Providence, took a modest salary increase (5 percent), earning $484,277 including a $113,712 bonus, followed by his chief medical officer, Dr. Kevin Keck, whose salary and bonus reached $448,641. The health plan brought in 23,531 new members and spent nearly $800,000 on medical expenses including $84,000 on pharmaceutical costs.
Board compensation tops $1 million
Although the directors who serve on the health insurer's boards are renumerated, there's no indication on the annual reports as to why they receive this money. All together, six insurers paid slightly over $1.3 million for board services in 2008. ODS Health Plan and Oregon Dental Service led the pack. Their 15-member board took home $453,360. Next in line was PacificSource, which gave out $453,360 to its 15 members.
Providence spent $277,750 on board compensation (15 members), while Kaiser’s 13 board members earned $207,929 and Regence trailed with $42,100 (4 members), along with HealthNet, paying $12,000 to a sole board member.
LifeWise and PacifiCare did not list any board compensation with the Insurance Division.
The following charts are compiled based on reports filed with the Insurance Division. Please note that some salaries, including but not limited to PacifiCare, do not represent complete compensation because executives may earn salaries from other entities of the company. Individual, group and total membership numbers were taken from the financial reports, while enrollment for Medicare Advantage comes from separate reports to the Insurance Division. Also, the total hospital/medical expenses include pharmaceutical costs.
The financial records of Oregon’s insurance companies are open to the public by making a request to the Oregon Insurance Division
at 350 Winter St., Salem, OR, or by calling 503-947-7980. Insurers are required to report quarterly financial information to the division.
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