For the first time, California's largest nonprofit health insurer has released the salaries of its 10 highest-paid executives in response to a new state law intended to keep healthcare insurance costs under control.
The top earner at Blue Shield of California was Chief Executive Bruce Bodaken, who made $4.6 million last year — more than four times the salary of his counterpart at the state's largest for-profit insurer, Anthem Blue Cross.
San Francisco-based Blue Shield revealed Bodaken's salary in documents filed with the state's insurance commissioner, who had demanded the information under the law that allows regulators to examine executive salaries and other criteria to determine whether insurance rate increases are "unreasonable."
In its report to the state, Blue Shield said that its 10 highest-paid executives earned more than $14 million total last year. The insurer identified the executives only by number, saying each earned $749,643 to $4,601,226. The top earner was listed as "chief executive officer," Bodaken's title.
"It's a totally out-of-proportion salary for a not-for-profit company," Jamie Court, president of the Santa Monica group Consumer Watchdog, said of Bodaken's salary. "This is a salary that would quench the thirst of one of the Fortune 500 companies on Wall Street."
Blue Shield defended the salaries of Bodaken and its other top executives, saying their pay "falls well within healthcare industry standards" for nonprofit and for-profit companies. The insurer said salaries were based on performance and were reviewed by an independent compensation consultant.
The insurer noted that its executives do not receive company stock, a perk enjoyed by top executives at for-profit companies.
"We offer a competitive compensation package to attract and retain top-quality executives necessary to maintain a high level of performance and service," Blue Shield said in a statement.
Bodaken's counterpart at Anthem Blue Cross, President Pam Kehaly, earns more than $800,000 a year if the company meets performance targets, a spokeswoman said. Kehaly, who took over the insurer in August, also receives stock awards.
Kehaly's boss, Angela Braly, chief executive of WellPoint Inc. of Indianapolis, which operates in 14 states and is the nation's largest health insurer by enrollment, earned $3.8 million in salary, along with more than $9 million in stock awards.
Blue Shield, with 3.5 million policyholders in California, has annual revenue of about $10 billion. Anthem has 8.2 million policyholders and revenue of $11 billion.
Comparing the two top executives is unfair, Blue Shield argued, because Bodaken and Kehaly's jobs are so different. As chief executive, Bodaken is in charge of a vast array of responsibilities that include public policy, and mergers and acquisitions. Kehaly is the president of a division of WellPoint, overseeing sales, marketing and the company's long-term strategic direction.
"It's an utterly invalid comparison," Blue Shield spokesman Tom Epstein said.
Epstein compared Bodaken's responsibilities and salary to the CEOs of other healthcare companies, including those running for-profit insurer Health Net Inc. and nonprofit Kaiser Permanente. Health Net Chief Executive Jay Gellert earned $2.4 million last year, plus stock and options valued at $3.4 million. Kaiser head George Halvorson had $6.7 million in total compensation and benefits.
A Kaiser spokesman said the company — which blends insurance coverage and healthcare for customers in nine states and Washington, D.C. — bears little resemblance to Blue Shield. "Our organization is very different than pure health insurers," Won Ha said.
Regardless of the comparisons, a top official with the California Department of Insurance said the release of the Blue Shield salary information was good news for consumers.
"As health insurance rates continue to increase steeply and frequently, there are a large number of policyholders who are shopping around.... Many would like to have a full picture of what insurers are spending their money on," Deputy Insurance Commissioner Janice Rocco said.