Earnings declined for the four largest Massachusetts health insurers last year as they stepped up investments in new products, technology, and markets in a rapidly changing business.
At the same time, compensation for top executives rose at two of the health insurance companies while declining at two others, according to reports filed with the state Friday.
The highest-paid executive at the nonprofit insurers was Eric H. Schultz, chief executive of Harvard Pilgrim Health Care in Wellesley. He drew total compensation of $1.9 million last year, up 38.5 percent from the nearly $1.4 million he received in 2012. But the biggest part of his compensation was a bonus payable in 2013 from a three-year incentive plan.
For all the health insurers, net income was squeezed in 2013 by mounting competition, as they responded to pressure from government and employers to make care more affordable.
“We’re facing the same challenges the whole industry is facing,” said Allen Maltz, chief financial officer at Boston-based Blue Cross Blue Shield of Massachusetts, the state’s largest health insurance carrier. He cited “adaptation and modernization” of information systems in response to new federal coding requirements and a consumer push for more accessible data.
Blue Cross Blue Shield paid its chief executive, Andrew Dreyfus, total compensation of $1.3 million in 2013, a 13.1 percent increase from the $1.2 million he received the prior year.
Two other insurance CEOs drew smaller pay last year. Total compensation fell 1.6 percent to $1.8 million for James Roosevelt Jr. at Tufts Health Plan in Watertown, and nearly 21 percent to $970,266 for W. Patrick Hughes at Worcester-based Fallon Health, according to the companies’ filings with the state Division of Insurance.
‘We’re facing the same challenges the whole industry is facing.’Allen Maltz, chief financial officer, Blue Cross Blue Shield of Massachusetts
The four insurers also continued paying their directors last year. The highest board fees were $87,086 for chairman William Van Faasen at Blue Cross Blue Shield, $60,000 for director Davey Scoon at Tufts Health Plan, $37,613 for director Constance S. Barr at Harvard Pilgrim, and $26,000 for chairman David W. Hills at Fallon, according to the filings.
Net income last year declined 57.8 percent to $69.1 million for Blue Cross Blue Shield, 12 percent to $19.8 million for Harvard Pilgrim, 32 percent to $70.3 million for Tufts Health Plan, and 13.7 percent to $13.2 million for Fallon, the companies’ filings said.
“We were spot on budget for our net income for the year,” said Charley Goheen, chief financial officer for Harvard Pilgrim. But, he said, income was reduced because “we’re making significant investments, going to a new [information technology] platform, expanding in Connecticut, and returning to the Medicare Advantage market.”