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After a rich severance deal, insurer issues refunds

Blue Cross was criticized for the multimillion-dollar package it gave Cleve L. Killingsworth as he left the CEO’s job. Blue Cross was criticized for the multimillion-dollar package it gave Cleve L. Killingsworth as he left the CEO’s job.
By Robert Weisman
Globe Staff / October 21, 2011

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State residents insured by Blue Cross Blue Shield of Massachusetts have started receiving refunds stemming from the health plan’s decision to distribute a total of about $4.2 million to its members, an amount equivalent to the severance paid to its former chief executive, Cleve L. Killingsworth.

But if policyholders expected to be taking a vacation with the money saved from their “premium credits,’’ they may want to set their sights on a latte, instead.

“You will see this one-time credit of approximately $3 per policy on the enclosed invoice,’’ Blue Cross, the state’s largest health insurer, wrote in notes sent with premium invoices this month to about 38,000 individual policyholders.

Blue Cross disclosed in July that it would issue the refunds to close the books on its widely criticized $11 million exit package for Killingsworth, who resigned abruptly last year. The decision to refund the severance pay portion came after talks with Attorney General Martha Coakley’s office, which conducted a four-month investigation. The office concluded that while Killingsworth was entitled to the money under his contract, the generous severance did not serve the purposes of a nonprofit insurer.

While Boston-based Blue Cross is refunding $4.2 million, Killingsworth won’t have to give back his severance or any other part of his payout, which included a salary and bonus.

“To put the issue behind us, and as a good-faith gesture to the community, the company made a decision to credit customers the amount of the severance paid to former CEO Cleve Killingsworth,’’ Blue Cross spokeswoman Tara Murray said yesterday.

Most of the health plan’s 2.8 million members are insured through employers, some of which receive premium invoices monthly and others quarterly. In those cases, Blue Cross is notifying the employers of the credits and letting them decide whether to make refunds to employees or set aside money in separate accounts to reduce employee health expenses.

Either way, the savings are more symbolic than substantial. And some individual policyholders were more baffled than grateful when they received the notices this week.

“It is too ridiculous to even be believed,’’ said Lois Rowe, a retired nurse from Swansea whose monthly premium with her husband, Charles, a retired social worker, was reduced from $1,384.47 to $1,380.97. “If they want to refund $4.2 million, let them build houses for the homeless. Or they should have a lottery and give the winners $50,000 each. Then the people who won would feel like they got something.’’

John Messenger, a contractor who recently moved to Massachusetts from the Washington, D.C., area, said: “It’s just insulting. I’m not sure what they should have done, but it unintentionally points out the whole wealth gap.’’ Killingsworth “gets $4 million, and all of us get $3. There’s a big difference there.’’

Not everyone was critical. Noting that the new Blue Cross management has been working harder to rein in premium increases for small employers, Jon B. Hurst, president of the Retailers Association of Massachusetts, said, “I give them credit for recognizing there was an issue here and doing it in good faith.’’

Hurst conceded, however, that “good intentions are not always greeted with open arms, given the level of anger out there’’ about rising health care costs.

Robert Weisman can be reached at weisman@globe.com.