Cozy relationships lead to Blue Cross/Blue Shield excesses by Marjorie Arons-Barron

The entry below is being cross posted from Marjorie Arons-Barron’s own blog.

The process for deciding and ratifying former Blue Cross/Blue Shield CEO Cleve Killingsworth’s exorbitant severance package seems to reflect what happens when movers and shakers in any sector get too comfortable with each other. We saw it on Wall Street; we see it in high-end non-profit health insurers. In neither area does coziness serve the public interest. Now it’s up to Attorney General Martha Coakley to investigate how specifically certain decisions were made, explain all to the public and correct the course for the future.

Cleve Killingsworth is a decent fellow who offered great promise to the community when former CEO Bill Van Faasen brought him here in 2005. Van Faasen is a wonderful guy himself and did lead an earlier, major BC/BS turnaround. They both had roots in Detroit. Killingsworth’s concern throughout his tenure was cost control, and he set about developing and implementing the so-called Alternative Quality Contract. It has informed what Governor Patrick is trying to achieve to curb costs in health care statewide.

Everyone wanted a piece of Killingsworth, a rare African-American among Boston’s ranking CEO’s, but he never seemed to gel with the community. Then, when BC/BS financials went south, his departure was arranged, apparently “according to the terms of his contract.” But the economy had soured; premium costs had skyrocketed, and everyone was feeling the pinch. Did the BC/BS board have to cave, or could they have said No? In a time of great distress, when many companies, and especially non-profits, did serious belt-tightening, did the board deserve all its own munificent fees?

One can only speculate what discussions there were, if any. Many of the board members individually would be an asset to any board, but together make for an unhealthy, inbred collective. Directors like Paul Guzzi, CEO of the Chamber of Commerce, and Bob Haynes, President of the Mass. AFL/CIO especially have egg on their faces because of their public position of concern about rising health costs.

Let’s face it. This board was largely an ol’ boys network. Even the women on the board were the usual suspects. (It’s only recently, in the wake of Sarbanes-Oxley, that some corporate and non-profit boards have striven for more independent voices.)

What had been largely unknown was how handsomely members were paid (between $60,000 and $90,000) for sitting on the board. The Boston Herald did an outstanding job of bringing this to public attention. Subsequently, the Globe’s Brian McGrory noted that only the health insurance company boards (and one utility) among all non-profits in the state pay their members. Let’s hope that Coakley includes that in her review.

Come to think of it: why should health insurers be non-profits? Automobile insurers are not. These huge salaries give the lie to their “non-profit” status. That money, both symbolically and substantively, could have gone into providing health coverage for thousands of individuals. They don’t need to be non-profit to be subject to regulation. Of course, if losing their non-profit status means they’ll have to pay taxes, that could spur premium hikes. That potential pitfall certainly makes the idea of single payer more appealing.

But that’s not going to happen, at least in the foreseeable future. What can be changed are those salaries and fees . The Attorney General needs to look long and hard at these characters and their decision-making process. They claim transparency, but none of the board members is talking. It’s time to let the sun shine in.

Please let me know your thoughts in the comments section below.