William L. Jews, who was fiercely criticized by legislators when he tried to engineer the sale of CareFirst BlueCross BlueShield, is expected to appear before insurance regulators tomorrow to defend a $17.65 million severance and retirement package that state officials say is excessive for a nonprofit health insurer.
Maryland's insurance commissioner ordered the inquiry after Jews stepped down as chief executive in a 2006 management shake-up, which triggered salary and bonus payments spelled out in his employment contract. It marks the second time that CareFirst has faced questions about whether a payout for Jews was too generous for an insurer whose mission is to put community health care ahead of profits.
Jews' compensation was first scrutinized by regulators when he tried to convert CareFirst into a for-profit company in 2001 and sell it for $1.3 billion -- a deal that could have netted the former executive a $39 million payday. Outrage over the deal's terms scuttled the sale and resulted in 2003 legislation locking in CareFirst's nonprofit status for at least five years.
The new law also replaced most of CareFirst's board and stipulated that executive pay must meet a "fair and reasonable" standard. Tomorrow's hearing before Insurance Commissioner Ralph S. Tyler will mark the first time the new standard has been put to the test. The inquiry centers on CareFirst's actions, but Jews is listed as an "intervenor" in the proceedings and is expected to testify.
If Tyler rules against the company, the insurance administration would seek to reduce Jews' severance package, which is being paid out over a number of years.
"I don't think anybody is worth $18 million -- period," said Del. Shane Pendergrass, a Howard County Democrat who was an author of the reform legislation.
Jews, credited with transforming the nearly insolvent Blues plan after taking the helm in 1993, could not be reached for comment. His attorney, Andrew Jay Graham, declined to comment.
CareFirst said two outside consultants concluded that Jews' proposed payout is reasonable when compared with other not-for-profit Blues plans. The insurer noted that about two-thirds of the payment comprises deferred compensation and retirement benefits Jews earned over more than 13 years as head of the company. It said terms of the contract were scrutinized and approved by CareFirst's reconstituted board, which is packed with state-approved directors charged with reinvigorating the insurer's nonprofit mission.
