William L. Jews is entitled to only half of his $18 million severance package from CareFirst BlueCross BlueShield, Maryland's top insurance regulator said yesterday in a ruling that accuses the former chief executive of abandoning the insurer's nonprofit mission.
In a 65-page order, state Insurance Commissioner Ralph S. Tyler wrote that CareFirst's board had violated a 2003 state law requiring executive pay for the nonprofit to meet a "fair and reasonable" standard. The decision marks the first test of the law, which was passed by legislators furious with Jews for trying to convert CareFirst to a for-profit entity and sell it to a California company.
The proposed deal to sell CareFirst included $39 million in potential bonuses for Jews and led to sharp criticism over the insurer's pay to executives, which helped to scuttle the deal. While executive pay has skyrocketed on Wall Street, lawmakers and regulators have argued that CareFirst should be held to a different standard. The company is the region's largest insurer, but its nonprofit status means that its mission should be to provide affordable and accessible health insurance, they contend.
"CareFirst is not just another private company, the board of which is more-or-less free to pay its CEO whatever it deems appropriate," Tyler said in the order. He called CareFirst's mission a "noble" one that "is not advanced by paying $18 million to its departing CEO."
Under Tyler's order, Jews is entitled to nearly $9 million of the $18 million severance package that CareFirst's board approved before the chief executive's departure in 2006. Jews, who says he stepped down rather than fight upset board members, has received $2.3 million in salary and other benefits since his departure. That amount, plus interest, will be deducted from the total.
Jeffery W. Valentine, a CareFirst spokesman, said the company was reviewing the order and had not determined what, if any, action to take. The company could appeal the decision to state circuit court, where the meaning of the 2003 statute has never been established.
Jews could not be reached for comment, and his attorney, Andrew J. Graham, did not return phone calls.
Tyler's ruling drew praise from lawmakers who had been critical of Jews and from corners of the health care community that had fought to preserve CareFirst's nonprofit mission in the belief that Maryland's health system would be ill-served by a corporation driven by profits and returns to shareholders.
