EXECUTIVE COMPENSATION: Remained High Last Year
A new analysis of 1997 HMO finances found that although the industry as a whole posted losses for the year, its top executives continued to take home millions of dollars in compensation. Families USA, a national consumer watchdog organization, found that top executives at the nation's largest HMOs earned an average of $2 million in 1997. Despite the losses incurred by most major HMOs last year, about 80% of their CEOs saw their compensation increase. Ron Pollack, executive director of Families USA, said, "The hypocrisy of the industry on the issue of health care costs is startling. They lose money in 1997 but spend millions to compensate their top executives, spend millions on advertising and lobbying to kill patient protections, and then they go around scaring the American public saying they will need to raise premiums to cover the very minor costs of comprehensive patient protections."
Number Crunching
According to the report, "Premium Pay II: Corporate Compensation in America's HMOs," the ten highest-paid HMO executives (exclusive of unexercised stock options) last year were:
- Stephen Wiggins, Chair and CEO, Oxford Health Plans (since stepped down): $30,735,093
- Wilson Taylor, Chair and CEO, CIGNA Corporation: $12,456,169
- William McGuire, CEO, United HealthCare Corp.: $8,607,743
- James Stewart, Executive Vice President and CFO, CIGNA: $7,306,921
- Robert Smoler, Executive Vice President, Oxford: $6,918,509
- Gerald Isom, President, Property and Casualty, CIGNA: $5,737,691
- Ronald Crampton, Former Chair and CEO, Aetna: $5,383,148
- H. Edward Hanway, President, CIGNA Healthcare, CIGNA Corporation: $5,282,734
- Donald Levinson, Executive Vice President, CIGNA: $5,177,026
- Eugene Froelich, Executive Vice President, Maxicare Health Plans, Inc.: $4,720,483
Other highlights from the report: David Jones, chair of Humana, Inc., earned $4,495,798 last year. Jeffrey Elder, Senior Vice President of Foundation Health Systems, Inc., earned $2,129,008; Alan Hoops, President and CEO of PacifiCare Health Systems, Inc., earned $1,745,788 and Leonard Schaeffer, Chairman and CEO of Wellpoint Health Networks, Inc., at $1,596,087. The Families USA report notes that executive compensation packages are normally augmented significantly with stock option packages. HMO executives with the largest of these unexercised packages include: McGuire of United HealthCare, with $61,178,652; Hoops of PacifiCare with $32,777,354; and Taylor of CIGNA with $19,959,354. The company with the highest average compensation for their top executives was CIGNA, at $7,192,108, followed by Oxford at $6,431,230; United at $2,852,423; and Aetna at $1,730,621.
Methodology
The Families USA analysis examined executive compensation for the 15 for-profit, publicly traded companies that owned HMOs with enrollments of more than 100,000, using each company's 1997 Securities and Exchange Commission filings. The companies owned 75 of the nation's largest HMOs in 1997 ("Premium Pay II: Corporate Compensation in America's HMOs," Families USA release, 9/16). To obtain a copy of the 1997 or 1996 reports, call Families USA at 202/628-3030.