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Here's what health insurers pay top execs Premiums are up, earnings are down -- and executive pay remains high

The three top executives of Western New York's dominant nonprofit health insurers boosted their combined take-home pay to $3.77 million last year, even though their companies' total earnings surplus fell by more than 18 percent, according to state regulatory filings.

HealthNow New York, Independent Health Association and Excellus Health Plan earned a total of $287.6 million in 2006, down significantly from $351.1 million the year before. Yet only Excellus' CEO, David Klein, saw any drop in pay -- and only by $3,300, holding above $1.78 million.

Meanwhile, consumers continue to see high-single-digit or even double-digit premium increases.

Insurers defend the pay as necessary to attract skilled executives.

"The health care industry is extremely complex and highly competitive, requiring experienced executives who are in high demand and short supply," said Independent Health spokesman Frank Sava.

Consultants agreed.

"I'm not at all surprised by the size of these numbers. They have to pay a lot of money to get the kind of talented executives they need to succeed," said David Bjork, managing director of the health care group at Clark Consulting in Minneapolis.

"It's not unusual. There are lots of organizations where people are making that kind of money in nonprofits," said Heidi Toppel, senior consultant at Watson Wyatt Worldwide in Providence, R.I. She added the lump sum listed in state filings could include deferred retirement credits.

The insurers also argue that, as nonprofits, they base their salaries more on customer satisfaction and their efforts to meet the health needs of the underserved, including through participation in government "safety-net" programs like Medicare. In fact, increasing surplus revenues may not be a sign that a nonprofit is operating most efficiently.

"Our CEO's salary is not based on how much money we make," said Kandis Fuller, spokeswoman for Univera Healthcare and its Rochester-based parent, Excellus. "Instead, our corporate performance is judged by how well we serve our members and our communities."

That makes sense, Bjork said. "You would hope that a not-for-profit bases its bonuses more on their success in meeting their tax-exempt mission," he said.


At HealthNow, the parent of Blue Cross Blue Shield of Western New York, President and CEO Alphonso O'Neil-White received total pay of $1.28 million last year, more than twice what his second-in-commands made. That's also up slightly from 2005.

Executive Vice President for Operations Cheryl Howe and Executive Vice President and Chief Financial Officer James H. Dickerson Jr. earned $634,814 and $623,809, respectively. Howe's salary fell 5.5 percent from 2005, while Dickerson's soared 22 percent.

Stephen G. Jepson, senior vice president of pricing and contracting management, received $458,643, a 33 percent drop, while Senior Vice President of Marketing and Business Development Nora McGuire earned $336,893, down 3.8 percent.

In all, the company's 10 highest-paid officers received $4.78 million, while 49 other managers earned at least $100,000 each, totaling another $6.7 million.

It also paid $645,368 to former senior vice president Gary J. Kerl, $430,604 to former vice president of corporate medical affairs Dr. John A. Gillespie, $339,488 to former executive vice president James A. Cardone, and $314,014 to former CEO Thomas Hartnett. Ex-vice presidents John M. Meka and Linda M. Navarra got $216,262 and $207,462, respectively.

Yet, earnings surplus last year fell 12.3 percent to just shy of $80 million, led by a drop in premiums. Total premium revenues fell 2.1 percent to $2.11 billion, exceeding a 1.6 percent drop in hospital and medical expenses to $1.83 billion. General and administrative expenses rose 10.8 percent to $148.1 million.

HealthNow disclosed that it paid $17.5 million to Arnold Katz, president of Brokerage Concepts, a King of Prussia, Pa.-based third-party administrator that HealthNow acquired last year. The company had not previously said how much it paid.

Additionally, it paid $400,000 to the Buffalo Bills; $205,000 to Hockey Western New York LLC, the Buffalo Sabres organization; and $130,000 to the Buffalo Philharmonic Orchestra.

It also paid $46,402 to Park Country Club, $35,638 to Wanakah Country Club, $35,000 to Shea's Performing Arts Center, $31,000 to the Albright Knox Art Gallery, $10,922 to the Buffalo Club, and $9,200 to the Saratoga National Golf Club.

HealthNow officials did not comment.

>Independent Health

No. 2 area insurer, Independent Health, paid $704,378 to its CEO, Dr. Michael Cropp, up 11.8 percent from a year earlier. Executive Vice President and CFO Mark Johnson received $515,759, a 20 percent increase, while Chief Operating Officer Carol Cassell got $424,177, up 23.8 percent. General Counsel Frederick Cohen earned $438,546, a 13 percent increase.

And former CEO Frank Colantuono, now a consultant to the board, took in $612,211 -- a 35 percent increase.

In total, the firm paid $4.13 million to its 10 top executives and $5.7 million to 41 others earning at least $100,000 each.

But earnings surplus fell 9.9 percent to $55.9 million, as expenses rose faster than revenues. Premium revenues increase 16.6 percent to $996 million, but hospital and medical expenses rose 19.7 percent to $871 million.

On the other hand, overhead expenses fell 13.8 percent to $47 million. Sava noted that the company's narrow surplus from operations -- just 2.7 percent of revenues -- together with low administrative costs -- just 10 percent -- means management is doing its job.


Finally, Excellus -- the biggest of the three insurers overall, but with the smallest Buffalo-area presence -- paid Klein, vice chairman Howard Berman, and Senior Executive Vice President and CFO Emil Duda $1.78 million, $1.75 million, and $1.48 million, respectively. All three were essentially flat from a year earlier.

Excellus Health Plan chief operating officer Kevin Hill took home $1.23 million, up 21 percent, while General Counsel Christopher Booth received an 8 percent increase to $1.13 million. All five are in Rochester.

Among the company's Buffalo executives, former Univera CEO Arthur Goshin, now an adviser to Klein, took in $855,313, down 12 percent.

Current Univera regional president Mary Lee Campbell-Wisley received $372,451, up 5.7 percent. Former Chief Medical Officer Dr. Jay Pomerantz earned $218,478, Regional Vice President of Sales Pamela Pawenski got $217,314, and Vice President Carolyn Frank got $201,547.

In all, Excellus paid $10.3 million to its top 10 officers and another $40 million to 250 others earning over $100,000 each.

However, surplus revenues tumbled 23 percent to $151.7 million, despite an 8.6 percent gain in revenues to $4.8 billion. Medical costs rose 10.7 percent to $4.2 billion, and overhead jumped 21 percent to $253 million.


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