Nearly every health insurance CEO got a pay raise in 2017—in most cases, bringing home more than 300 times the amount their average employee earned.
All together, CEOs at the nation’s largest insurance companies earned $342.6 million in 2017, with the highest-paid executive bringing home $83.2 million, more than 1,400 times what the average employee brought home.
The top eight insurance companies paid out twice as much money to their top executives as they did the previous year thanks to notable churn in C-suites across the industry, according to an analysis of SEC filings by FierceHealthcare. The review included Aetna, Cigna, Molina, WellCare, Centene, UnitedHealth Group, Humana and Anthem.
The analysis includes both executive compensation reported by the insurers in annual proxy statements (identified as "reported compensation" in the chart below), as well as total realized compensation based on exercised stock options and stocks vested (identified as "total compensation"). The latter calculation offers a more accurate reflection of what each CEO’s W-2 looked like at the end of the year, and it's frequently higher than the amount reported by the company.
Of the nine CEOs that publicly reported data last year, all but two took home more in total compensation than they did the previous year.
In some instances, realized compensation is as much as three times the total compensation reported by the company. Such is the case for new UnitedHealth Group CEO David Wichmann, who was paid more than $83 million in 2017, thanks to $58.8 million in exercised options.
Wichmann, who most recently served as the company’s president, took over for former CEO Stephen Hemsley in September. Although new to the role, Wichmann has been with the company since 2002, which likely accounted for the massive payout. In 2016, as president, he took home $25.2 million.
Combined, UnitedHealth paid the two executives more than $110 million last year.
Molina shelled out $34.7 million to two different executives. Most of that went to former CEO J. Mario Molina, M.D., who was fired by the board of directors in May of last year. Molina took home $30.5 million, which included nearly $25 million in vested stock and a $5 million severance payment.
Molina’s replacement, Joseph Zubretsky, was paid $4.2 million. Zubretsky stepped into the role in October.
Meanwhile, Anthem paid two CEOs a combined $26.6 million in 2017. CEO Joseph Swedish, who stepped down in November, took home nearly all of that, while his replacement, Gail Boudreaux, took home just $166,000 given her start date late in the year. Her base salary moving forward is $1.4 million, plus $10.3 million in long-term incentive awards for 2018.
Among the insurers with more C-suite stability, Aetna's Mark Bertolini took home $58.8 million in 2017, up from $41.7 million the year before. Realized compensation for Cigna's David Cordani nearly doubled from $22 million in 2016 to $43.9 million last year.
Humana's Bruce Broussard also doubled his realized compensation from $17 million in 2016 to $34.2 million in 2017.
CEO pay ratios skewed
SEC regulations require each insurer to report a CEO-to-employee ratio based on total executive compensation versus the company’s median employee salary.
But that ratio is not always an accurate reflection of the pay discrepancy since it doesn’t account for realized compensation. FierceHealthcare calculated the ratios based on the current CEO’s take-home pay versus the median employee salary.
In the chart below, the "reported" ratio is the figure each company filed with the SEC. The actual ratio is our calculation based on the current CEO's actual realized compensation in 2017.
For example, Wichmann’s massive payout in 2017 significantly increased UnitedHealth’s ratio from 298:1 to 1,425:1. Likewise, Aetna’s ratio nearly tripled from 235:1 to 738:1.
Based on Cordani’s realized income, Cigna’s ratio jumped from 279:1, as reported by the company, to 697:1.
Using that formula, other insurers skewed in the opposite direction. Molina, which reported a 450:1 ratio based on Zubretsky’s total compensation, dropped to 91:1 when accounting for realized gains. Likewise, Anthem was just 2:1 given Boudreaux's minimal take-home pay last year. The company's reported ratio was 262:1.
Graphics by Eli Richman.