Sick over the health honchos' pay
By Danny Westneat

Seattle Times staff columnist

You might not think these would be the fattest of times in the health-insurance business.
Medical costs are soaring. The number of people buying health coverage is plummeting. It's a double whammy that's pinching the insurance industry and fueling the nation's health-care crisis.

So they say.
So how is it that the CEO of Premera Blue Cross, Herbert "Gubby" Barlow, of Mercer Island, scored a $1.3 million bonus in 2009? Even as his company served up insurance to 10 percent fewer people than the year before?

Including the bonus, Barlow made $2.2 million in 2009, up $115,000 from 2008, according to compensation data released Tuesday by the state Office of the Insurance Commissioner.

Group Health President Scott Armstrong's pay and bonus came to $1.6 million — a 31 percent boost over the year before.

And Mark Ganz, CEO of Regence health plans in Washington and Oregon, came in third in this dubious sweepstakes, earning $1.1 million including bonus.

Have I mentioned that these three companies are all nonprofits?

"Look, I'm a Republican, so I don't usually get outraged by what people are paid, but this really angers me," says Brian McCulloch, a Shoreline insurance consultant and longtime nag of the state's nonprofit insurers.
"With all these plans jacking up premiums and losing members to the ranks of uninsured, they choose now to grab all this money off the table?"

In defense of Regence, the total compensation of their CEO, Ganz, was the only one of the three that apparently dropped in 2009. (The state says the pay figures may not be complete because most insurance companies have out-of-state subsidiaries that aren't required to report here.)

Despite the recession and an inflation rate near zero, all three companies raised average premiums substantially in 2009 (Regence by 17 percent; Group Health, 13 percent; and Premera, 6 percent, according to the state.)

The pay, the premium increases, the opposition to more regulation of its industry — it all led a former insurance executive in Oregon to charge that Regence has started acting more like a hedge fund than the Northwest's largest not-for-profit health insurer.
Of course CEO pay isn't what really matters in the health-care debate, just as it wasn't the crucial factor on Wall Street. Lowering it to zero wouldn't make medicine any more affordable for the rest of us.

But million-dollar bonuses are a sign something's gone off the rails, Robby Stern told me as he helped put yellow crime-scene tape around Regence's Seattle headquarters in a protest Tuesday.
"Health care is a fundamental need people have," he said. "It's not supposed to be a product to make people rich."
Now Stern is a '60s lefty and retired labor union leader (he was protesting Regence on behalf of Puget Sound Alliance for Retired Americans.)
McCulloch ran twice as a Republican for state insurance commissioner.
After talking to them both, I can vouch they don't agree on practically anything about health-care reform.

Except this: Insurance profits are obscene.

McCulloch estimates the big three local insurers are holding $1.3 billion in surpluses that could be returned to the public. While still leaving plenty of cushion to pay out future claims.
The insurance companies counter that they aren't the problem. Rising medical costs are the true culprit in America's health-care crisis.
They may be right, at least in the long term. Controlling doctor and hospital bills is going to be the toughest challenge.

Because it means eventually we'll all have to do something as Americans we're not very good at: Accept less.
To get the hang of that, I vote we start with the guys getting the million-dollar bonuses.



Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.



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