Washington state Insurance Commissioner Deborah Senn last week said Blue Cross of Washington and Alaska and King County Medical Blue Shield are fiscally sound, but she criticized the insurers' executive compensation and perquisites.
The conclusions came after a nine-month probe of the state's two largest health insurers.
Ms. Senn said the investigation, launched last year to determine whether the organizations were misusing enrollees' money, found the business and financial operations at Blue Cross to be in order and didn't show signs of abuse.
However, the review of King County Medical cited the insurer's entertainment and travel expenses as "not fully documented and in some cases inappropriate." The commissioner recommended that the health plan establish firm reimbursement policies regarding travel perquisites.
The report also was critical of Blue Cross' executive compensation packages. The commissioner said executive pay "should reflect the organization's status as a not-for-profit corporation, not one whose stockholders are seeking a return on their investment."
Ms. Senn called for increased oversight by the Blue Cross board of directors in determining executive compensation. She cited former Blue Cross President and Chief Executive Officer Donald Lockwood's $584,133 compensation package as one of the nation's highest for a health plan the size of 440,000-enrollee Blue Cross.
She quoted a 1992 executive compensation survey by the national Blue Cross/Blue Shield Association that showed the median salary for a CEO of a 500,000-enrollee plan to be $215,000.
Blue Cross executives maintain, however, that executive salaries at the health plan are in line with those paid to executives in similar healthcare-related jobs and fall well below national estimates for executives of similar size companies in other industries.
The state said the examination of the health insurers' finances, sales and claims practices was necessary because it was concerned that not-for-profit health insurers had escaped regulation with little accountability to consumers who purchase healthcare coverage (Sept. 20, 1993, p. 4).