Tufts, Harvard Pilgrim to keep paying board members
Harvard Pilgrim Health Care board members joined Tufts Health Plan directors today in saying they will keep paying themselves five-figure annual fees despite objections from state Attorney General Martha Coakley.
The two major health insurers bucked the trend set by rivals Blue Cross Blue Shield of Massachusetts and Fallon Community Health Plan, which both decided earlier this month to suspend their board fees. Those decisions came after Coakley opened an inquiry into compensation of directors at nonprofit health plans, amid public outrage over the decision of the Blue Cross board to give its departing chief executive an $11 million payout.
In a statement, Wellesley-based Harvard Pilgrim, the state's second largest health insurer after Blue Cross, said its board members actively participate in the insurer's $3 billion business. "We rely on them to apply their specialized experience and skills in the areas of medicine, accounting, finance and law, to support our company and its mission," the statement said. "Our board serves as responsible, independent fiscal stewards for our members' premium dollars."
Tufts, based in Watertown, said in a separate statement that its board believes there is "an additional overlay of responsibility" for directors of a health insurance carrier compared with board members of other nonprofits, which don't compensate directors.
"Unlike the directors of other nonprofits, they are subject to distinct regulatory considerations," the Tufts statement said. "Therefore, compensation for time, commitment and skill of top talent is a responsible approach for the oversight of an organization that provides health care coverage to hundreds of thousands of Massachusetts and Rhode Island residents."
Harvard Pilgrim chief executive Eric H. Schultz and Tufts chief executive James Roosevelt Jr. declined to discuss their boards' positions on compensation, their spokeswomen said.
Documents filed with the state Division of Insurance March 1 showed that both companies last year paid their directors substantial sums for part-time board service -- including annual stipends and fees for attending meetings. While less generous than those collected by Blue Cross directors, payments ranged from $21,900 to $68,100 at Harvard Pilgrim and from $19,500 to $82,500 at Tufts.
Tufts board member Thomas P. O'Neill III, former lieutenant governor and chief executive of public affairs firm O'Neill & Associates, earlier this month said he would donate his board fees to a charity until the board resolved the issue. O'Neill, who sits on the governance and marketing committees of the Tufts board, said yesterday that his fees will be given to Boston Health Care for the Homeless at least until August, but that he will eventually resume collecting them.
O'Neill defended the Tufts' board action. "What Martha [Coakley] asked for us to do is to go back and think this over," he said. "The history and tradition of nonprofit health plans is to pay in this state. These are people from various walks of life who bring a skill set. These are not political hacks... It's because of the responsibility, the time, the effort, and the work you have to put into it. It's a lot of homework."
Critics, however, said insurers should not be paying members at a time when premiums have been soaring by double digits annually for small businesses and individuals. "Given the economic climate and the premium climate for small businesses, they're not appropriate," said Jon Hurst, president of the Retailers Association of Massachusetts. "My biggest problem is none of the board truly reflect small business. They don't represent the types of consumers who've been hurt in the last four or five years."
In addition to its inquiry into board payments at the state's nonprofit health plans, Coakley's office is investigating how Blue Cross board members decided to give former chief executive Cleve L. Killingsworth a pay package totaling $11 million after he resigned last year. The disclosure of Killingsworth's compensation on March 1 prompted widespread criticism from the public and some officials. Board members' pay also came under scrutiny as a result.