Blue Cross bosses pocket pay hikes

Blue Cross bosses pocket pay hikes

Maurice Smith, who took the helm last June, got a 63% boost to $5.9 million, while longtime board Chairman Milton Carroll’s pay jumped 81% to $8.9 million.

Lesar and Smith, each of whom served as HCSC’s CEO for part of 2020, collected a total of $22.8 million last year. That’s significantly more than competitors paid their top executives during a banner year for health insurers. Anthem chief Gail Boudreaux took home $17.1 million, Humana’s Bruce Broussard got $16.5 million and Cigna’s David Cordani got $19.9 million, according to proxy statements.

Pay rose alongside profits at the nation’s seventh-largest health insurer, which owns Blue Cross & Blue Shield plans in Illinois, Texas, Montana, Oklahoma and New Mexico. Net income at HCSC soared 75 percent to nearly $4 billion on a 14% rise in revenue to $44 billion. Revenues increased as more people enrolled in HCSC plans, according to HCSC spokesman Greg Thompson.

Compensation decisions at HCSC “are based on competition in the industry for talent, as well as near- and long-term performance standards, including benefits to members such as expanded access to coverage and efforts to help control the rise in medical costs,” Thompson says in an email.

But Carroll, an energy industry executive who has served as HCSC’s board chairman since 2002, collected far more than his counterparts at comparable publicly traded health insurers last year. Humana and Cigna, for example, paid their nonexecutive chairmen $545,157 and $550,964, respectively.

“I don’t see chairmen of the board for very large public companies making anywhere near that amount of money,” says Mark Reilly, managing director of the Overture Alliance, a Chicago-based executive compensation consultancy. Reilly notes that board chairmen typically work about five days a month and make roughly $500,000 a year.

Thompson declines to say how much time Carroll spends on company matters, but he notes that it’s “significantly more time” than a typical board chair. He says Carroll’s pay reflects “substantial institutional knowledge based on a long tenure with our company, including managing CEO transitions,” and that “the continuity of his leadership was critical to the company’s strength and stability.”

Carroll has collected $930,000 in recent years when there wasn’t a leadership change, but he took home $4.9 million in both 2016 and 2017 pursuant to a two-year agreement under which he helped oversee a transition to new executive leadership, an HCSC spokesman told Crain’s in 2019.

Reilly says overseeing CEO transitions and helping new leaders understand a company’s culture and how its board functions are common duties for most board chairmen.

“To think somebody should get $8.9 million—it’s excessive,” Reilly says. “The board is deciding pay, and the board is increasing his pay as chairman of the board. There’s a conflict of interest there, possibly.”

The remaining eight HCSC directors collected $2.4 million last year, down 12% from 2019 when there were three additional members. Pay for individual directors (not including Carroll) ranged from $176,407 for former Houston Rockets basketball player Clyde Drexler to $346,261 for Dr. Dianne Gasbarra.

Sources familiar with HCSC’s board say Carroll has a history of filling open spots with directors who are loyal to him, noting that several members have ties to the energy industry.

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Marie Maynes
Marie Maynes is a Sports enthusiast and writes for the Sports section of ANH.