Total compensation for Blue Cross CEO rises 19%, to $2.96M

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WINSTON-SALEM, N.C. — The release today of Blue Cross and Blue Shield of North Carolina’s executive compensation for 2013 reopens the debate about what is fair and competitive for a not-for-profit health system to offer.

Blue Cross is the state’s largest health insurer, with more than 4,000 employees, including 600 in the Madison Park office complex in northwest Winston- Salem.

James “Brad” Wilson, its chief executive and president, received a 5 percent raise in salary to $897,427. His bonus jumped 27 percent to $2.03 million.

Wilson’s total compensation was $2.96 million, up 19 percent from 2012 and up 63.4 percent over the past two years.

Blue Cross also reported a 60.5 percent jump in net income to $92.6 million in fiscal 2013. It experienced a 10.3 percent growth in revenue to $6.4 billion, and a 2.4 percent increase in membership to 3.84 million.

Although some high corporate pay in general has drawn attention, health care compensation is particularly sensitive because of its impact on medical costs and insurance premiums throughout society.

All nine of the insurer’s listed executives made at least $289,000 in salary during 2013, with two others besides Wilson topping $500,000. Counting Wilson, seven executives received a bonus of at least $575,000, while six received total compensation of more than $1.1 million.

Blue Cross spokesman Lew Borman has said the insurer’s pay philosophy “is results-oriented tied to performance on a variety of measurable indicators, including service to customers, membership, enrollment, financial stability and other measures.”

“It’s based on a number of measures of company goals set by an independent board of trustees in consultation with a national independent consultant.” Borman said executive salaries “are in line with other companies of our nature and size.”

“Less than one-tenth of a cent of premium dollar goes to executive compensation,” Borman said. It said it spent 85.9 cents per premium dollar on patient medical care.

Wilson is not the only prominent N.C. health-care executive to receive at least $1 million in annual compensation.

Carl Armato, chief executive of Novant Health Inc., made $934,520 million in salary, $686.576 in incentive pay and $2.79 million in total compensation in fiscal 2012. The not-for-profit organization typically releases its executive compensation data in November.

Dr. John McConnell, chief executive of Wake Forest Baptist Medical Center, made $983,777 in salary during the center’s fiscal 2011, along with $384,203 in bonus and incentive pay, and $2.04 million in total compensation. Wake Forest Baptist typically releases its executive compensation data in May, making the data about 10½ months old when provided.

Both hospitals cite similar executive-compensation justifications as Blue Cross, as well as the skills and expertise necessary to run a large health-care system.

Critics say not-for-profit health-care systems receive tax advantages and public-relations benefits from their status while compensation committees justify corporate-level wages and benefits to top executives.

Supporters of current compensation levels say nonprofit hospitals need to offer attractive pay to get the best executives in a complex industry.

Blue Cross said it incurred $118.3 million in local, state and federal taxes compared with $92.1 million in 2012 and $160.2 million in 2011.

Blue Cross’ profit margin was at 1.4 percent in 2013 compared with 1 percent in 2012 and 3.2 percent in 2011.

The insurer said its net income was affected by infrastructure and technology spending necessary for it to comply with the Affordable Care Act.

“In a challenging year for the health-care industry, our company provided value for our customers” through its ACA investments “to meet our increasingly diverse customers’ health care needs,” Wilson said in a statement.

Blue Cross cited that its network discounts with doctors and hospitals “saved customers over $5.7 billion in health care expenses.”

The insurer said it had $5 billion in claims and medical expenses, up 11 percent. Claim volume exceeded 50 million compared with 48.1 million in 2012.

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