"We believe he is entitled to the compensation that he's earned," said Jeff Valentine, a spokesman for CareFirst.
Attorneys for the Maryland Insurance Administration counter that Jews' pay deal is fundamentally flawed, beginning with its reliance on net profits as a major basis for calculating his compensation. In pre-hearing briefs, the state contends that CareFirst under Jews became increasingly focused on boosting profits at the expense of its obligation to promote affordable health care in the state. Any pay package that ignores CareFirst's nonprofit objectives should be deemed illegal, the state argues.
"The severance package includes sums that have been calculated under an incentive compensation plan that was based upon, and designed to reward, the willful abandonment of CareFirst's nonprofit mission and the pursuit of a for-profit strategy," the brief says.
But Jews' attorney argued in a competing brief that it would be unconstitutional for the state to rewrite the former executive's employment contract. The deal was struck with CareFirst's board in 1998 -- five years before lawmakers passed legislation establishing the "fair and reasonable" standard.
CareFirst disclosed terms of the deal -- including Jews' pay -- to state regulators annually and was never told of any objections, Graham contends in the brief.
Some health advocates counter that CareFirst never should have struck the deal. They say the nonprofit should be spending more to help those who can't afford health care, rather than paying executives millions in retirement.
"It looks to us like they don't have their priorities straight," said Walter Smith, executive director of D.C. Appleseed Center for Law and Justice, an advocacy group that has been critical of CareFirst.
The criticism comes as CareFirst's new management is striving to rebuild its image as a benevolent health care provider. The insurer won praise from state officials after agreeing this year to help seniors bridge a coverage gap known as the "doughnut hole" in Medicare drug plans. But critics point out that the program's $7 million-a-year cost seems small next to Jews' nearly $18 million retirement fund.
"With [$7 million] they are helping thousands of people who are low-income, ill and need help, and with $17 million we could be giving one person a great retirement and pay package to buy a new car and take trips and have a great time," said Pendergrass, the Howard County delegate.
But in legal briefs, CareFirst warns that going back on the deal could jeopardize its ability to attract the kind of high-quality executives it needs to fulfill its nonprofit mission. Future job prospects might balk at taking a top post knowing that state regulators may second-guess their pay years later.
"There is no reason why a skilled executive would choose to work for CareFirst if he or she must accept the risk of being stripped of his or her ... long-term benefits," the company says.
paul.adams@baltsun.com
