For immediate release: June 2, 2010
Contact: (802) 223-6131
Berlin, VT - Blue Cross and Blue Shield of Vermont (BCBSVT) announced today that it has reached an agreement with state regulators to reduce the fees that it charges to customers by $3 million to address state concerns over the compensation of its retired president and chief executive officer. The agreement brings to an end a review by the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) into the benefits provided to William R. Milnes, Jr., who retired in 2008 after serving as BCBSVT president and CEO for 10 years.
"We accept the findings of Commissioner Thabault and are satisfied with the agreement to resolve this," said Don George, BCBSVT's current president and chief executive officer. "We are particularly pleased that the Commissioner accepted our proposal to address the state's concerns by providing our customers with some needed premium relief, and that the agreement recognizes other significant cost saving measures that we have implemented over the last two years."
Under the order agreed to this week, BCBSVT will reduce its administrative fees to customers by $3 million over the next two years. The reduction will be applied on a per member, per month basis. BCBSVT also agreed to provide the state in 2010 and 2011 with its Medical Cost Management Plan, which identifies strategies the company has under way to help hold down health care costs.
BISHCA initiated its review into Mr. Milnes' compensation early in 2009, citing concerns that a supplemental retirement benefit that was put into place when he was hired more than a decade ago may have been inconsistent with BCBSVT's statutory obligation to operate at "minimum cost through efficient and economical management." BCBSVT cooperated fully in the review, which expanded to include all aspects of Mr. Milnes' compensation.
In her order, Commissioner Paulette Thabault concluded that the compensation provided to Mr. Milnes over the period of his employment, and including his retirement benefit, was excessive by about $3 million. In setting Mr. Milnes' compensation BCBSVT's Board had sought recommendations from a leading national consultant on executive compensation, and in signing the order the company neither agreed to nor disputed BISHCA's findings.
"Compensation decisions are by their very nature subjective," said Mr. George. "Different experts, looking at the same set of facts, can arrive at different judgments. Our Board decided that the interests of our customers, members and the state of Vermont are best served by accepting the Commissioner's findings, so that we can focus on the future and on our role as a partner to government and our customers in implementing needed health care reforms to assure affordable, quality health care for every Vermonter."
In her order, Commissioner Thabault noted that BCBSVT's Board of Directors has made significant changes to the company's executive compensation programs, re-evaluating and revising the compensation packages of all executive officers. The Supplemental Executive Retirement Program (SERP) benefit for Mr. George was frozen as of the date of his appointment as President, and the Board directed that the long term incentive program for all executives be eliminated. Further, the company trimmed the number of executives from nine to seven, reducing overall executive compensation. In addition, the Commissioner noted, the BCBSVT Board in 2009 reduced its own committee meeting fees by 50 percent.
Blue Cross and Blue Shield of Vermont is the state's only locally based health plan, and it provides health benefits for more than 150,000 Vermonters. Headquartered in the central Vermont community of Berlin, the non-profit company employs nearly 350 Vermonters and in 2010 is celebrating its 30th anniversary as an independent, Vermont-based company. More information about Blue Cross and Blue Shield of Vermont is available on the Internet at www.bcbsvt.com. Blue Cross and Blue Shield of Vermont is an independent corporation operating under a license with the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield Plans.