A climate of ill will for CareFirst executives

March 14, 2002|By Michael Olesker

IN THE LOCAL parlance, insiders sometimes call CareFirst BlueCross BlueShield by its diminutive name. Not CareFirst, but Care Less. It's a sneer at the firm's perceived indifference to health care workers, and to all those needing medical help minus the bureaucratic aggravation.

But nobody's accusing CareFirst's top officers of caring less, not when it comes to cashing in. Yesterday, Chief Executive Bill Jews made his case to state Insurance Commissioner Steven B. Larsen. Jews wants $9 million in a so-called "success fee" if the company is sold to WellPoint Health Networks, out of California. Jews' cut would be part of a larger package to CareFirst senior executives. They would divide $33.2 million. That is not a misprint.

There is much debate over this gift executives wish to give themselves. Dancing as fast as they can, the execs are telling Larsen and state legislators that the deal is about making CareFirst a better company, and pay no attention to all of us guys huddled behind the curtain counting our money.

They are not exactly finding a warm response. Before this is over, the sale may go through -- but it is likely to take up to a year, and it won't happen before a few people vent their emotions in public. This is reflective of the national mood of the moment, epitomized by anger at those executive bandits at Enron Corp. who quietly managed to tuck away millions before their company collapsed, and left their employees holding empty bags formerly containing their life's savings.

Nobody's saying CareFirst is in such a teetering financial position. In fact, WellPoint Health wants to fork over $1.3 billion for it. Is that a fair price? Some legislators, such as Sen. Robert R. Neall, think CareFirst might be worth twice as much. Will it mean better, quicker company response to those in need? Is it a smart deal for the state of Maryland?

Such questions, all fair enough, have gotten a little obscured in the buzz over these executive bonuses. There's the vague smell of conflict of interest in the air, insinuations about CareFirst executives hustling the deal hard mainly for their own benefit, and not just the company's.

"That payout," Senate Finance Committee Chairman Thomas L. Bromwell was saying yesterday morning at the State House, "that's the thing everybody's talking about. In corporate America they understand that kind of deal, but people who pay the bills don't understand for a moment. And I don't either. We hear about this kind of thing all the time. But it's still ..."

Breathtaking is the word. Bill Jews makes $2 million a year, and wants $9 million more if the sale goes through. Other executives would get their own major payouts.

It's a part of an infuriating national trend over the past 20 years, in which the rich get richer and everybody else gets lost in the shuffle. According to figures at the Congressional Budget Office, a quarter-century ago, the richest 1 percent of the country had incomes equal to the total income of 49 million of the poorest people. And those were the good old days. By 1999, that same wealthy 1 percent had an income equal to the bottom 100 million people.

The last time we had a presidential election around here, and George W. Bush was criticized for wanting major tax breaks for the wealthy, he suggested his critics were fostering "class warfare."

And why not? Bush offered a tax cut in which 30 percent of the benefits went to the richest 1 percent of the country, and 60 percent of the money to the richest 10 percent of the country -- and the bottom 90 percent would settle for the scraps. That's not supposed to contribute to "class warfare"?

This brings us back to executive salaries. Two decades ago, when Ronald Reagan became president, the typical CEO of a large American company was making about 40 times what typical workers made. A decade later, he was making about 85 times as much. But, by the end of the Bill Clinton years, according to the Washington-based Institute for Policy Studies, big-time CEOs were averaging 419 times as much as their average workers.

And that's the atmosphere in which Bill Jews and the other executives find themselves, as they attempt to sell CareFirst and cash in big-time.

"What it's done," Neall, one of the biggest critics of the deal, said yesterday at the State House, "is cause us to lose some of our focus on the actual sale. It's harder for us to judge the sale on its own merits."

Actually, it's one of two such problems. The other is this: If the sale dissolves, CareFirst would have to pay WellPoint $37 million for its trouble. Thus, Neall introduced a bill forbidding both the breakup fee -- and the golden parachutes for executives.

"And then, let's judge this [proposed sale] strictly on its merits," he said.

There's enough riding on it that nobody should Care Less.

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