CareFirst CEO got 34% raise last year

Incentives, salary gave him paycheck of $2.7 million

September 20, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

William L. Jews, chief executive of CareFirst BlueCross BlueShield, collected $2.7 million in salary and incentive pay last year, a 34 percent raise over the previous year's compensation, according to documents filed with the Maryland Insurance Administration.

Six executive vice presidents received $372,780 to $862,038, an average raise of 20 percent for the five who were with CareFirst throughout 2000 and 2001. Daniel J. Altobello, the chairman of the CareFirst board, was paid $84,667, an increase of 18 percent.

Pay and bonuses have been a flash point in the debate over whether to allow the nonprofit insurer to convert to a for-profit company and sell itself for $1.3 billion to WellPoint Health Networks Inc., the huge California insurer.

Just after the WellPoint deal was announced in November, Maryland Attorney General J. Joseph Curran Jr. wrote to legislative leaders expressing concern: "The compensation for [CareFirst's] executives and board members dwarf the pay of other similar nonprofits in the state, most of which pay their board members nothing at all."

Again yesterday, critics seized on the numbers as inappropriate for CareFirst.

"The word to describe it is outrageous," said Del. Shane Pendergrass, who calculated Jews' pay at more than $1,300 an hour. The Howard County Democrat said Jews had asked to meet with her soon to discuss the deal, "and that hour of his time is worth $1,300. I feel very honored."

A.G. Newmyer III, chairman of the Fair Care Foundation, a Washington group opposed to the deal, said, "CareFirst compensation numbers underscore the obvious reality that the board and senior management are running the nonprofit for their own benefit, rather than following their charter as `charitable and benevolent.' "

CareFirst defended the payments yesterday in a written statement.

"Compensation and benefits paid CareFirst executives and the board of directors are based on marketplace comparisons. They are developed by an independent compensation consultant, Hay Group Inc., are indexed to and are on par with that paid executives of similar insurance companies and other Blues plans," it said.

"The compensation consultant reports directly and independently to the board of directors. The goal of a competitive compensation package is to attract and retain talented leaders at both management and board levels."

According to the CareFirst filing, the comparative marketplace salary for Jews was $2,773,170, about $70,000 more than the chief executive was paid.

According to the filing, Jews received $904,333 in base pay and $1,798,811 in incentives. According to CareFirst's statement, incentive bonuses for last year were based on meeting or exceeding targets for membership growth, customer service and financial performance during 2000.

In 2000, CareFirst posted net earnings of $63.8 million, down from $69.8 million the year before, after adjusting for the addition of Blue Cross Blue Shield of Delaware, according to the company's annual report for 2000. Membership grew 8.1 percent that year. CareFirst already included the Blue Cross plans in Maryland and Washington.

"In the private sector - which these guys keep forgetting they are not part of - it is common for managers to bulk up their compensation right before a major transaction," Newmyer said. "That's because post-merger paychecks, and/or severance, are often based upon most recent compensation."

This year, the Maryland legislature blocked incentive bonuses of $33.2 million - including $9.1 million to Jews - that were to be paid to CareFirst executives if the sale to WellPoint was completed.

The executives still stand to pocket $48.9 million, including $18.9 million for Jews, in deferred incentives, retirement pay and severance.

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