published Sunday, May 15th, 2011

Greenbacks for BlueCross

RELATED ARTICLE

Salaries at the top


10 FOR-PROFITS UNDER BLUECROSS UMBRELLA

A dozen identities are owned and operated by BlueCross BlueShield of Tennessee, including 10 for-profit businesses.

• BlueCross BlueShield of Tennessee Inc.: Formed in 1945, BlueCross is Tennessee’s largest health insurance provider and is organized as a not-for-profit mutual benefit corporation. The Tennessee BlueCross plan is one of 39 independent licensees of the BlueCross BlueShield Association.

• Southern Health Plan Inc.: Incorporated in September 2003, the Southern Health Plan is a not-for-profit, social welfare organization that acts as a charitable foundation. Operating under the name of BlueCross BlueShield of Tennessee’s Community Trust, the foundation contributed $573,000 to more than 150 charitable organizations last year.

• Tennessee Health Foundation Inc.: Also begun in September 2003, THF is a not-for-profit public benefit corporation that is licensed as a charitable foundation. In 2010, the foundation distributed $4.3 million in charitable gifts.

• BeneVive Inc.: Founded in 2006, BeneVive is a for-profit, wholly owned holding company of BlueCross and holds the stock and appoints directors for five for-profit businesses: Online Health, Shared Health, RiverTrust Solutions, Security Care and Riverbend Government Benefits Administrator.

• Onlife Health Inc.: This for-profit business operates as Gordian Health Solutions Inc., and is headquartered in Franklin, Tenn. Founded in 1996, the company is a national personal health coaching company that serves many businesses, including other insurers.

• Shared Health Inc.: Incorporated in April 2005, Shared Health is a for-profit business created to work on electronic health records and other health care technology infrastructure. The business works with patients, doctors, employers and insurers to improve quality and efficiency by communicating vital medical information through a single secure online source.

• RiverTrust Solutions Inc.: Started in December 2003, this for-profit business contracts with the federal government for Medicare and Medicaid services, including durable medical equipment appeals, pharmacy and equipment audits in New Jersey and acute care services reviews.

• Security Care Inc.: Incorporated in July 2004, Security Care is a for-profit business to partner with government and businesses for fraud prevention, detection and investigation.

• Riverbend Government Benefits Administrator Inc.: Incorporated in October 2002, this for-profit business helps BlueCross provide Medicare services.

• Southern Diversified Business Services Inc.: Started in July 1982, this for-profit holding company holds the stock on Volunteer State Health Plan Inc., Group Insurance Services Inc., and Golden Security Insurance Co. Inc.

• Volunteer State Health Plan Inc.: Incorporated in 1996, the plan is a licensed health maintenance organization and provides TennCare services, including managed care organizations, and other services to BlueCross.

• Group Insurance Services Inc.: Incorporated in 1964, this for-profit business acts as a broker to provide stop-loss insurance, group life insurance, voluntary employee benefit products and other insurance products.

• Golden Security Insurance Co. Inc.: Incorporated in 1982, this is a for-profit business licensed as a shell insurance company in Tennessee, Alabama, Arkansas, Texas, Mississippi and Louisiana. It currently is not conducting any business.

Source: BlueCross BlueShield of Tennessee


BLUECROSS BOARD MEMBERS AND THEIR PAY

The BlueCross board comprises between 11 and 17 members who serve three-year terms and meet at least four times a year. In 2010, the 13 board members collectively were paid more than $1.02 million by BlueCross.

• Lamar Partridge, chairman of VMI Holdings LLC in Chattanooga, has been chairman of the BlueCross board since 2009. 2010 pay: $100,000

• Betty W. DeVinney, a retired executive for Tennessee Eastman in Kingsport, is vice chairman of the BlueCross board. 2010 pay: $90,000.

• Hulet Chaney, CEO emeritus of Tennessee Farmers Insurance Co. in Knoxville. 2010 pay: $75,000

• Gus B. Denton, a retired executive for SunTrust Bank from Memphis. 2010 pay: $80,000

• DeWitt Ezell, a retired executive for BellSouth from Brentwood, Tenn. 2010 pay: $75,000

• Herb Hilliard, an executive of First Tennessee Bank in Memphis. 2010 pay: $90,000

• James M. Phillips, managing partner of Pinnacle Investments in Memphis. 2010 pay: $75,000

• Gloria S. Ray, director of the Knoxville Tourism and Sports Corp. 2010 pay: $90,000

• Emily J. Reynolds, senior vice president for the Tennessee Valley Authority in Nashville. 2010 pay: $75,000

• Paul E. Stanton Jr., M.D., president of East Tennessee State University. 2010 pay: $75,000.

• Scott Wallace, a visiting professor from the Darden School of Business at the University of Virginia. 2010 pay: $90,000.

• John F. Germ, president of Campbell & Associates Inc., in Chattanooga. 2010 pay: $26,666.64 before he left the board.

• William Gracey, chief operating officer with LifePoint Hospitals and HCA president of the MidSouth region before joining BlueCross as president last year. 2010 pay for his board service: $75,000

Source: BlueCross BlueShield of Tennessee payments for BlueCross and subsidiary retainers in calendar 2010


COMPANY AT A GLANCE

Name: BlueCross BlueShield of Tennessee

Founded: 1945

Headquarters: Chattanooga

Staff: 5,330 employees, including 4,539 in Chattanooga

Revenues: $5.2 billion in 2010

Members: 3.1 million

Annual claims: More than 65 million

BlueCross BlueShield of Tennessee doubled what it pays its directors and chief executive officer in the past five years, boosting the salary for part-time board Chairman Lamar Partridge to $100,000 and raising the compensation package for CEO Vicky Gregg to more than $4.4 million.

BlueCross officials insist the bigger paychecks to those in the boardroom reflect the growing size and complexity of managing Tennessee’s biggest health insurer. The Chattanooga-based company covers more than 3 million people and runs a dozen subsidiary businesses and foundations — both for profit and for charity.

Critics, however, object to the pay hikes for those running a nonprofit company that has raised its average premiums by more than triple the inflation rate since 2005.

“When the rest of the country is hurting and struggling to keep a roof over their heads and food on the table, the amount of compensation that is being paid to directors and the CEO at BlueCross BlueShield is just absolutely absurd,” said Tony Garr, deputy director of the Tennessee Health Care Campaign, a Nashville-based group that supports health care reform.

Ethan Rome, executive director of Health Care for America Now, a national health consumer advocacy group, urged regulators to take a tougher look at how BlueCross spends its money.

“You’ve got an overpaid group of board members who go to a small number of meetings a year to decide how much they are going to pay the CEO,” he said. “So it’s not a surprise that they award excessive pay for the CEO when they are getting paid so much themselves.”

Most BlueCross directors were paid from $75,000 to $90,000 each to attend quarterly board meetings and other committee and company sessions last year. Emily Reynolds, a $274,000-a-year senior vice president for TVA who must take leave time to serve on an outside corporate board, said she took eight vacation days last year to attend to her responsibilities on the BlueCross board.

Partridge, president of Valley Capital Corp. in Chattanooga and head of the 11-member BlueCross board, said directors “commit a tremendous amount of time, energy and expertise to guide the company” and have had to assume more risk and responsibility as regulations have been added.

“It is critical for the state — and Chattanooga — that BlueCross performs well,” he said. “Our company is consistently ranked by industry experts as among the best-performing health plans in the country.”

Under Gregg’s leadership as CEO since 2002, BlueCross has boosted its enrollment by nearly 37 percent, kept premium increases below the industry average and improved its productivity by consolidating operations in a new corporate campus, Partridge said.

“BlueCross has assembled a talented and high-performing senior leadership team,” he said. “In that time, BlueCross has doubled revenues and market share, which directly reflects leadership’s effectiveness and the value they bring to this organization.”

BlueCross paid out $8.7 billion in health care benefits last year, so executive pay represents only a tiny fraction of premium dollars paid by consumers.

Average premiums for employer groups rose by more than 40 percent in the past five years even after many employers shifted a bigger share of health care costs and premiums to their workers. But most of that increase came from increased utilization and higher rates charged by hospitals and physicians, BlueCross spokeswoman Mary Danielson said.

“Even if Vicky Gregg and the entire board gave up all of their pay and became volunteers, that would only amount to 15 cents a month for the average BlueCross member,” she said.

Blues in Massachusetts

In Massachusetts, a not-for-profit BlueCross plan similar to BlueCross of Tennessee recently did drop its board members’ pay after the state attorney general said the longtime practice of paying directors for a nonprofit group can’t be justified.

“We can’t think of a good reason why, in a not-for-profit setting, they should compensate their directors,” Massachusetts Attorney General Martha Coakley said.

David Spackman, chief of the state office that oversees nonprofit and charitable organizations in Massachusetts, said paying directors not only diverts money from the nonprofit’s mission, but it “has the potential to impair board independence.”

“Individuals who have a personal financial interest in the affairs of a charitable organization may not be as likely to question the decisions of those who determine their compensation or fees or to give unbiased consideration to changes in management or program activities,” he said.

The board of the Massachusetts BlueCross plan, which is twice as big as Tennessee’s, agreed in March to suspend their directors’ pay, which had averaged $70,000 to $90,000 a year.

But BlueCross in Tennessee was not created as a type of charity like the BlueCross plan in Massachusetts.

“We pay all of the taxes just as if we were an investor-owned company, and we must compete for business just like any other insurance company,” BlueCross Communications Director Roy Vaughn said.

Last year, BlueCross reported earnings of $119.6 million on more than $5.2 billion in revenues. As a not-for-profit company, BlueCross earnings are added to its reserves, which grew to a record $1.4 billion at the end of 2010.

The insurer paid $240.4 million in local, state and federal taxes last year, according to the company’s 2010 annual report.

Pay for Performance

Partridge said the BlueCross board uses a national compensation consultant to set executive pay based upon market competition.

Gregg’s pay was less than a third of what Cigna Corp. paid its top boss in 2010. Cigna, a nationwide health insurer more than four times larger than BlueCross of Tennessee, more than doubled the compensation of CEO David Cordani last year to an industry high $15.2 million.

Wendell Potter, a former senior executive of Cigna who left the company three years ago and joined the Center for Public Integrity, said executive pay at nearly all health insurers “is ridiculous.”

“The rate of increase for the executives at these companies is far and above what it is for regular employees, and I’m sure there are plenty of highly qualified people who would do very well at these jobs for far less money,” he said.

Unregulated pay

When Gregg turned 55 in 2009, her contract activated partial vesting of certain deferred compensation, swelling her total pay package that year to nearly $6.2 million.

But in its regulatory filings on salaries paid strictly by BlueCross BlueShield of Tennessee, Gregg’s salary in 2009 was listed as $1.7 million.

Most of the compensation for BlueCross directors and top officers comes from for-profit businesses that BlueCross has started or bought over the past three decades.

Vaughn said BlueCross has launched separate for-profit ventures to help fulfill its health care mission while exploring related business opportunities, including new ventures for technology, wellness promotion and government contracts around the country.

Executives and board members receive part of their compensation from such subsidiaries and affiliate companies.

The 1945 law that established BlueCross of Tennessee, as amended, restricted what directors may be paid each year to $10,000 from the state-regulated BlueCross plan. But since 2000, as new businesses have been added under BlueCross’ ownership, directors’ and executives’ pay has been raised with payments from other BlueCross subsidiaries, records show.

Vaughn said directors of major businesses often are paid far more to serve on boards that oversee a company’s operation. Chattanooga’s biggest private, for-profit company, disability insurer Unum Corp., which generates twice the revenue of BlueCross, paid its board members between $175,784 and $322,002 last year, according to the company’s proxy statement.

“We’re responding to marketplace needs and opportunities, but always in a way that complements BlueCross’ core mission of serving Tennessee’s health care needs,” Vaughn said.

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timesfreepress said...

Do you think it's fair for the directors' pay to increase? Do you think their reasoning makes sense?

May 15, 2011 at 1:51 a.m.
hcirehttae said...

“You’ve got an overpaid group of board members who go to a small number of meetings a year to decide how much they are going to pay the CEO,” he said. “So it’s not a surprise that they award excessive pay for the CEO when they are getting paid so much themselves.”

Wow, I haven't heard it better expressed. That quote says it all.

"Most of the compensation for BlueCross directors and top officers comes from for-profit businesses that BlueCross has started or bought over the past three decades."

Interesting. Are you reading this, Mr. Attorney General?

“Individuals who have a personal financial interest in the affairs of a charitable organization may not be as likely to question the decisions of those who determine their compensation or fees or to give unbiased consideration to changes in management or program activities,” he said.

Gee, do you think so? How do you suppose that works? Something about scratching backs...

Vicky Gregg epitomizes a new breed of nonprofit robber barons who are "too big to fail." They can never be demoted, never make a wrong decision, never be satisfied with where they are. They've reached the happy hunting ground where, regardless of performance, their compensation can only increase exponentially "to match the industry standard" because "we have to be competitive in the marketplace." Nonsense and corruption! The quote at the top succinctly explains the cronyism behind this sordid situation; it's what goes on in boardrooms all across America today.

My employer's rates with BCBS go up 20-30% each year despite single-digit inflation, and BCBS always sends a representative to tell us it's going to be twice that initially -- oh, but wait, they'll renegotiate and juggle the figures because they're such decent people. ("I've gone to talk to my manager, and gee, this is your lucky day...")

Then that BCBS representative with a somber visage shows us with slides and graphs how only a few people with massive claims -- read, two of our co-workers who died after expensive illnesses -- are making these rates go up so much, and if we'll all just quit smoking (we already did, decades ago) and eat broccoli and do yoga, our rates would-- not exactly go down, but they would have more money in the pot for Vicky Gregg and her Merry Band to have their richly-deserved pay raises. (They didn't actually say that last part; I figured that out on my own.)

In answer to your question, Mr. Flessner, yes, their reasoning makes sense... to them.

May 15, 2011 at 8:07 a.m.
Libertine said...

Some takeaways: The bottom line is these salaries would not move the needle financially for BCBST insureds if they were lower, or even eliminated.

Second, we have people talking about compensation for not-for-profit insurers, as if they were a charity, which they are not.

Third, there are four or five critical voices, but only Blue Cross people defending themselves (not that they need to be defended). I bet with some effort, Mr. Flessner could have found any number of people ready to speak for BCBST. Also, Wendell Potter is getting rich(er) biting the hand that formerly fed him. Disgruntled ex-employee, I say, rather than moral crusader.

Finally, to get health reform passed, the Administration and its supporters in Congress had to make someone the bad guy. The public pays its health care dollars to insurers, not to their (deservedly) millionaire doctors or hospitals (whose executives are similarly well compensated). So, they were the easy target.

I'm insured by BCBST and know lots of people who work there. They believe they are doing work that helps people. I agree with them. I know the company does a lot of good for this community. Their executive and board compensation is not higher or lower than similar companies, so I have no problem whatever with it.

May 15, 2011 at 10:18 a.m.
Libertine said...

Oh, and by the way, the main reasons premiums go up is a health care inflation rate many times the overall inflation rate -- that includes your family doc, specialists, hospitals and especially medical equipment companies and big pharmaceuticals. Those are the people the Administration and Congress left alone. I wonder why? Bigger contributions maybe? Nah, couldn't be.

May 15, 2011 at 10:23 a.m.
Legend said...

These are the ones sucking the federal government's tits dry with governent handouts. Not the little guy receiving foodstamps, medcaid, welfare or social security.

May 15, 2011 at 11:22 a.m.
nowfedup said...

NO ONE, to include the highly lucrative (for top end) healty care, elected local to feds, and other strap hangers getting big dollars... NONE ever discuss A. Why are "costs" going up at 7-10% PER YEAR? B. Who exactly, is making the big bucks in Health Care that drive up the much discussed but NEVER investigated, "COSTS? C. What is the relationship(s) between providers-insured-as well as "Contributions" to elected, as NEVER discussed/audited are huge profits-wages by ALL the health care players,

And amusingly not ever addressed by our elected is the cash cow for top end players in the "Nonprofits", which is biggest tax rip off going. Time we fess up, someone in health care is bleeding citizens, commoners, to death

May 15, 2011 at noon
ordinaryguy said...

Ask a vast majority of the BCBST about the paltry 2% increases given the last few years, the increased premium they pay, and the increased intrusion into the personal lives of those those hard working people.

May 15, 2011 at 1:29 p.m.
eeeeeek said...

So everyone DIDN'T only get a 2% pay increase at BCBST.

May 15, 2011 at 1:33 p.m.
amm90 said...

One point not brought out in the article is the compensation Gregg receives for being on the board of directors of First Horizon National Corporation--also around $100,000. I don't know of any normal working person who can identify with receiving that kind of money for maybe 8 days of work per year. There is a fraternal brotherhood/sisterhood of these corporate board members who over compensate themselves and need to be held accountable. Last year, First Horizon, after taking TARP money, highly overcompensated their execs with taxpayer dollars and then repaid TARP by diluting the current shareholders. Secondly, there may be a conflict of interest as Governor Haslam's brother is on the board of First Horizon too. As mentioned in the article, BCBSTN is the healthcare provider of choice for the State.

May 15, 2011 at 5:14 p.m.
dl said...

Disgusting. Embarrassing. Shameless.

May 18, 2011 at 6:17 p.m.
Winner said...

Care to elaborate dl? Sounds like a little penis envy to me.

May 20, 2011 at 7:31 a.m.
debijhewitt said...

StrongI am disabled from BCBST. I worked there 12 years and became disabled in 2002. Per my policy I had BCBST was to always pay for my Insurance premiums for Health..vision..dental..and prescription..In December of 2009 I received a packet that explained the Board of Directors had decided to change the policy and would no longer pay my premium. I was to pay half the premium for 2 years and then the whole premium from then on. I was very upset about this since I don't have a lot of money and could not afford to pay half. My first premium would be due Jan. 1,2010. I did not have the money to pay. If you miss one payment you have to pay any current payment and the past due or they will return your check. I was never able to catch up on my premiums and I no longer have insurance. My Insurance was cancelled! I am disabled and it was hard paying co-pays but now I have to come up with cash before I am able to go to the doctor. I no longer can afford to get 90 day prescriptions I was only able to get 2 lower priced prescriptions each for 30 days I could not afford the 90 days prescription price.I really need to go to the doctor and get my prescriptions I have not been able to save my money to do that. After I pay for the Doctor visit I don't have any money to pay for blood test..or any other test. I called the TN insurance commissioner office and they said BCBST can do anything they want to do they are self-insured. Everyday since I received the information I had to pay for my insurance I have tried to figure out what I can do how can I get help. I need my prescriptions and need to see my Doctor I can't do either. Most people know without the health care you need you will die. It happens to people all over the world. Medicare is not an option because BCBST has paid for my premium I didn't take out Medicare because I didn't need it. Now Medicare is charging me the basic fee of $115.00 plus 10.00 per year penalty for not having medicare. I can't afford that because it is over $200.00 a month just for health. Per Ron Harr BCBST can't pay for my premiums any longer because they can't afford to and others in the area don't provide that benefit. BCBST expects me to go to the Doctor because I have to be reviewed every 2 to 3 years and the doctor has to complete paperwork on my medical status. I don't know what I'm going to do. I feel so bad for people without health insurance I don't know what is going to happen to all of us without insurance. I also had insurance to help me in case I have to go into a nursing home. I no longer have that and I don't know what is going to happen to me. I have to pray daily not to get bitter over this situation. When I see what all the board members make and the profit BCBST makes. I don't understand why they can't afford to pay for my insurance premiums.. I just want my insurance back...!!!

June 13, 2011 at 11:30 a.m.
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