Coakley seeks power to halt nonprofit board pay
State Attorney General Martha Coakley plans to file legislation that would give her the authority to prohibit public charities from paying board members.
In a report released this morning, the state attorney general's office said nonprofit health insurance companies aren't justified in compensating board members, despite the current practice of some to pay directors five-figure annual fees for their part-time service.Coakley also said her office will publish annual reports detailing health plan board compensation and rationales. Her plans were set to be unveiled at a news conference in her office late this morning.
Today's report follows an outcry over the board fees paid by nonprofit health insurers, which are classified as public charities in Massachusetts, in the aftermath of the disclosure that the board of Blue Cross Blue Shield, the state's largest health plan, last year voted to give departing chief executive Cleve L. Killingsworth about $11 million. Coakley has launched a separate inquiry into Kllingsworth's payout.
Boston-based Blue Cross Blue Shield and another health insurer, Fallon Community Health Plan of Worcester, have since suspended their board payments. But two other carriers, Harvard Pilgrim Health Plan of Wellesley and Tufts Health Plan of Watertown, said they intended to continue compensating members of their boards.
As part of the attorney general's investigation, the health plans were invited to provide their rationales for paying directors. Most nonprofit charities in the state, such as hospitals and universities, have all-volunteer boards. The insurers have said their directors provide expertise on everything from finance to risk management in a complex and competitive market, but Coakley rejected that argument.
"Compensation of board members creates unavoidable conflicts of interest and diverts resources otherwise focused on achieving the mission of the charity," Coakley said in a statement released this morning. "These organizations enjoy significant tax and other benefits due to their charitable status, and we asked them to justify why they should be treated differently from other charitable boards. We found their explanations to be unjustified."
Coakley applauded the decisions by Blue Cross and Fallon to suspend their board fees. "We do not believe that Harvard Pilgrim nor Tufts have an adequate basis to continue to pay their board members, and we once again urge them to discontinue the practice in the interest of their charitable purpose," she said.
Payments to board members last year ranged from $21,900 to $68,100 at Harvard Pilgrim, the second largest health insurer in Massachusetts, and from $19,500 to $82,500 at Tufts, the third largest, according to documents filed with the state Division of Insurance. Blue Cross last year paid its directors between $56,200 and $84,463.