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Blue Cross parent firm sued over big profits, big bonuses

By Mike Dennison
Independent Record (Helena, Mont.), May 28, 2014

The parent firm of Blue Cross and Blue Shield of Montana has been sued by a benefits-administration group that says the Chicago-based insurance giant is hoarding excess profits and unduly enriching its executives.

The lawsuit, filed last week in federal court in Chicago, said Health Care Service Corp. is breaching its contract with customers by running up excess profits of nearly $5 billion.

The Chicago Tribune first reported on the lawsuit, which said that money should have been distributed to HCSC customers as a paid dividend, reduced prescription drugs costs or lower premiums. Instead, HCSC used some of the money to pay nearly $100 million in bonuses to its top executives from 2011-2013, the suit said.

The Lee Newspapers State Bureau reported last year that HCSC Chief Executive Patricia Hemingway Hall received $16 million in compensation in 2012, including a $14.9 million bonus.

In all, the company’s top 10 executives took home $53 million in bonuses for 2012, when the company reported $1 billion in net revenue.

Figures on HCSC’s executive pay for 2013 weren’t immediately available Wednesday.

HCSC, which has 8.5 million fully insured customers, owns Blue Cross plans in Montana, Texas, Illinois, New Mexico and Oklahoma.

The company bought Blue Cross and Blue Shield of Montana last year for $40 million. In Montana, HCSC has about 250,000 customers.

John Doran, a Blue Cross spokesman in Montana, said Wednesday that HCSC is “in the process of analyzing the pending litigation and will determine (its) next steps.”

The suit was filed by Babbit Municipalities Inc., a Chicago-based benefits administration company that does business as Group Benefits Associates, working primarily with labor unions. The company asked the court to certify the lawsuit as a class-action that would include all of HCSC’s fully insured business.

The Chicago law firm representing Babbit is one of the largest consumer class-action firms in the country, according to the Tribune, and has brought dozens of consumer lawsuits against large, prominent companies.

The lawsuit said HCSC had a $10.3 billion reserve at the end of last year when it needs only $5.4 billion in reserves.

Holding such a large reserve “obliterates (the company’s) purpose as a nonprofit mutual corporation and exceeds the bounds of proper business judgment,” the lawsuit said, and makes the company effectively a for-profit firm that provides “no substantial mutual benefit to its members.”

HCSC posted net income of $684 million last year and $1 billion a year in 2010, 2011 and 2012, the Tribune reported.

http://helenair.com/news/local/blue-cross-parent-firm-sued-over-big-prof...

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2013 salaries for Blue Cross executives in Montana

By IR State Bureau
Independent Record (Helena, Mont.), May 29, 2014

While Blue Cross and Blue Shield of Montana’s parent company is being sued over allegedly excessive bonuses paid to its executives, its top executives in Montana actually saw a pay cut last year.

Mike Frank, who’s now president of the Montana Division of Health Care Service Corp., received about $228,000 in compensation last year, including a $224 bonus.

In 2012, the year before Montana Blue Cross was purchased by HCSC, Frank was paid $635,000 as president and CEO of the Montana health insurer, including a $213,000 bonus.

HCSC, based in Chicago, bought Blue Cross and Blue Shield of Montana last year. A lawsuit filed last week alleges that HCSC has made excessive profits and used some of that money to pay millions of dollars in bonuses to its executives.

Last year, after HCSC bought Montana Blue Cross, its highest-paid executive in Montana was Mark Burzynski, the vice president for provider services. He received $334,700 in compensation, including a $190,000 bonus. That amount is $14,000 less than he was paid the previous year by Blue Cross.

Other top HCSC Montana executives’ salaries last year were:

  • Frank Cote, vice president of Montana sales, $184,000 – about $37,000 less than he received in 2012.
  • Monica Berner, vice president and chief medical officer, $164,000, or $47,000 less than in 2012.
  • James Spencer, chief actuary, $159,300 – about $121,000 less than in 2012.

http://helenair.com/news/local/salaries-for-blue-cross-executives-in-mon...