In an apparent effort to boost public confidence and close the controversy surrounding executive payouts, Blue Cross Blue Shield of Massachusetts is refunding its customers $4.2 million--the same amount of severance pay it gave to former CEO Cleve Killingsworth.
The move was announced as part of Massachusetts Attorney General Martha Coakley's report summarizing her four-month investigation into Blue Cross's payout practices. Coakley's office determined that Killingsworth was entitled to the $11 million payout under his contract; however, it also concluded that such generous severance packages diminish board independence and don't advance the insurer's corporate purposes, reports the Boston Globe.
Coakley clarified during a press conference that Killingsworth isn't returning any part of his payout. Instead, Blue Cross will deduct the $4.2 million from its 2011 earnings, giving consumers a one-time reduction in premiums of a little less than $2 per member, the Boston Business Journal reports.
Blue Cross also promised to re-examine its recruitment and succession plans for top execs to assure a broader portfolio of experience, skills, and ideas, its board of directors said in a statement.
Coakley praised the Blue Cross refund and noted that the board and its new CEO Andrew Dreyfus have negotiated a compensation package that represents a sharp reversal in the otherwise "inexorable rise in healthcare executive compensation" that will send a more consistent message regarding cost and affordability, reports the Boston Herald.
To learn more:
- read the BCBSMA statement
- check out the Boston Business Journal story
- read the Boston Globe article
- see the Boston Herald piece