Profits up at Mass. health insurers
Executive payouts, premiums rise
Capitalizing on fewer people seeking medical care and submitting claims, the state’s four biggest commercial health insurers posted sharply higher earnings for 2011 while their executives collected more pay, according to reports released yesterday.
Leading the pack was Blue Cross Blue Shield of Massachusetts, the state’s largest health insurance company, which reported net income of $136.1 million last year, more than 10 times the $13.4 million it earned in 2010 when it suffered steep losses insuring small businesses and individuals.
Harvard Pilgrim Health Care registered 2011 net income of $93.5 million, up from $49.6 million the prior year. Tufts Health Plan posted net income of $87.6 million last year, an increase from $58.8 million in 2010. And, Fallon Community Health Plan reported net income of $38.5 million last year, reversing a loss of $8.8 million the prior year.
The financial reports come as health plans have been negotiating new payment models with doctors and hospitals, giving slighter increases to medical care providers under revised contracts, and requesting more modest premium hikes for their customers.
“We’re trying to maintain the affordability agenda,’’ said Allen P. Maltz, chief financial officer of Blue Cross, who cited the Boston-based insurer’s 2011 operating margin - the percentage of money it makes from its revenue - of 0.7 percent. “We’re doing our best to return the good results to our customers and not see them drop to the bottom line.’’
But a consumer advocate said the more favorable trend in health care costs should be resulting in lower premiums for employers and individuals, not just less burdensome increases.
“Premiums are still increasing, and they’re already too high,’’ said Deirdre Cummings, legislative director for the Massachusetts Public Interest Research Group. “This is the same dance insurers have been doing for some time, and this is what consumers are frustrated by. Insurers are reaping the benefits that should be going to consumers.’’
One year after an $11 million payout to former Blue Cross chief executive Cleve L. Killingsworth sparked a volley of criticism, insurers yesterday released new compensation data that showed higher pay for top executives but no Killingsworth-size packages.
James Roosevelt Jr., chief executive of Watertown-based Tufts, drew total compensation of $1.7 million last year, up from $1.2 million in 2010. Harvard Pilgrim, based in Wellesley, paid chief executive Eric H. Schultz, a total of $1.2 million in 2011 compared with $795,000 the year before. W. Patrick Hughes, chief executive of Fallon in Worcester, received total pay of $810,000 last year, an increase from the $649,000 he earned in 2010.
The current Blue Cross chief executive, Andrew Dreyfus, collected $874,000 in total compensation, up from just under $800,000 in 2010. Dreyfus declined to take a bonus last year to demonstrate his commitment to health care affordability, said Blue Cross senior vice president Jay McQuaide.
Four former Blue Cross senior executives, who did take bonuses last year, received higher pay than Dreyfus, led by former chief legal counsel Sandra L. Jesse, who drew total compensation of $3.5 million. Maltz also received higher pay than Dreyfus, taking home just over $1 million, including a bonus.
Last year’s financial reports spotlighted the insurers’ payments to board members, which created an outcry from consumer advocates at a time of rising premiums. Blue Cross and Fallon subsequently suspended their directors fees, though Harvard Pilgrim and Tufts continue to pay them.
Directors compensation ranged from $5,500 to $52,500 at Tufts last year, with Davey Scoon collecting the highest fee. Harvard Pilgrim’s board payments ranged from $27,300 to $45,300, with Barry L. Shemin receiving the most pay.
While fees were suspended at Blue Cross, board payments for the first quarter - before the suspension took effect - ranged from $15,400 to $39,100, with Bill Van Faasen getting the highest. First-quarter fees at Fallon, before they were suspended, ranged from $850 to $2,125 for Richard P. Houlihan.