I asked what impact C-Suite executive salaries have on insurance rates, and it turns out that Chris Conover on Forbes took a shot at answering the closely associated question: if the CEOs’ compensation were confiscated and used to pay down insurance rates, what would be the impact?
How much money might the average plan member save if only we could confiscate the allegedly “eye-popping” (former industry “insider” Wendell Potter’s characterization) CEO compensation paid to executives of the nation’s largest health insurers?
The answer? Peanuts.
I went to the proxy statements of all 9 health insurance and managed care companies appearing on last year’s Fortune 500 list (this year’s list will not appear until May). As stock investors are well aware, the summary compensation table lists all components of compensation provided to each of the firm’s executive officers. These include salary, bonuses, stock awards, other non-equity forms of incentive compensation and other types of compensation such as health insurance, retirement and similar fringe benefits. Not all firms have yet reported their 2015 compensation levels, so I used 2014 figures and divided these by the latest membership figures I could find in annual reports etc.
The results are instructive. Average total CEO compensation at Fortune 500 health insurers amounts to 42 cents per member!
Which is fascinating, if accurate. And makes the central question of the motivation for the jump in rates that much more interesting. A reader did point me at a FB posting of some salaries, but I was unable to verify the source. Instead, I dug this up from MedCity News, which includes a quote from the aforementioned Wendell Potter:
Wendell Potter, former public relations executive for Cigna, where CEO David Cordani raked in a $14.5 million salary in 2014, said, “There’s no doubt that one of the reasons why Americans pay more for health insurance and for healthcare than people in any other country in the world is because of this high executive compensation.”
So who’s right? On the one hand, the guy actually doing math is more impressive than the PR guy who’s just waving his hands. On the other hand, does the math actually make sense?
