A recent report issued by a consumer group shows that top HMO executives are enjoying large compensation packages in a period when consumers face double-digit premium rate hikes.
The report, issued by Washington, D.C.-based Families USA, documents that top HMO executives received more than $54 million in compensation in 2000 and had $358 million in unexercised stock options. The report comes as the managed health care industry is fighting patient rights legislation with arguments that the cost of such protections are too high.
However, Amanda McCloskey, director of health policy at Families USA, said judging from executives’ salaries, health plans are doing just fine.
The highest paid executive in the industry in 2000 was William W. McGuire, CEO of UnitedHealth Group Corp., at $54.1 million in salary and stock options.
Executives of other managed care companies , including Cigna Corp. in Philadelphia, WellPoint Health Networks Inc. in Thousand Oaks and Aetna in Hartford, Conn. , also received multimillion dollar compensation packages and unexercised stock options in the millions of dollars.
‘Lavishing’ Executives
“The managed care industry is increasing premiums at 10, 12, 15 and even higher percentages per year and is lavishing large compensation packages on its top executives,” said Ron Pollack, Families USA’ executive director.
Annual premium rates for employer-sponsored coverage have risen 10.3 percent on average from 2000 and 2001, the group reported.
For 2002, health insurers predicted even higher premium rates, citing reasons of rising health care and pharmaceutical costs.
Kaiser Permanente recently announced it would boost premium rates by 11.6 percent in 2002 in Southern California, affecting 5,400 members in San Diego County.
Meanwhile, Kaiser chairman and CEO Dr. David Lawrence earned $1.25 million in 1999.
Kaiser spokeswoman Sylvia Wallace defended his pay.
Lawrence’s pay package represents about a fifth of the national average of the top five executives running for-profit HMOs, said Wallace.
Out of Kaiser’s $16.8 billion in total revenues in 1999, $11.1 million was devoted to pay Kaiser’s 35 top executives, she said.
More recent salaries for Kaiser were not available.
25 Percent Rate Increase
Health Net, which covers 148,000 San Diegans, plans to raise premium rates between 19 percent and 25 percent for 2002, said Woodland Hills-based company spokeswoman Lisa Robertson.
That compares to premium rate hikes between 11 percent and 17 percent in 2001.
“The vast majority of the premium dollars goes into providing health care,” said Robertson without offering exact figures.
Meanwhile, Health Net President and CEO Jay Gellert received $665,517 in compensation in 2000 and had $6.5 million in unexercised stock options, Families USA reported.
Robertson defended Gellert’s compensation package as “being significantly less” than that of rival HMOs.
PacifiCare Health Systems, Inc., said July 31 it will raise 2002 premium rates between 15 and 17 percent to offset higher health care costs, said PacifiCare spokesman Dan Yarbrough.
Last year, PacifiCare boosted premium rates between 10 and 10.5 percent.
The HMO has 200,000 commercial members in San Diego and 95,000 Medicare members.
PacifiCare President and CEO Howard Phanstiel received $728,193 in compensation in 2000 and $10.2 million in unexercised stock options.
Senate and House versions of a patients rights bill both passed on Aug. 3, and are being reconciled in a joint conference committee.
Families’ USA McCloskey said she is pleased that an agreement has been reached that will offer consumers some protection.
