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January 14, 2015 12:00 AM

Aetna competitors unlikely to match $16 minimum wage move

Bob Herman
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    Aetna's competitors have no plans to follow its lead by raising employees' minimum wage to $16 an hour while also improving their health benefits, according to those interviewed at the J.P. Morgan Healthcare Conference in San Francisco.

    All Aetna employees, starting in April, will earn at least $16 an hour, or about $33,000 a year for full-time workers. About 5,700 Aetna employees, most of whom work in customer service or other administrative roles, will see a pay raise as a result. That will amount to an average increase of 11% and as much as 33% for some employees.

    Also, upward of 7,000 employees will be eligible for lower out-of-pocket healthcare costs, but they must meet certain income levels and agree to participate in wellness programs.

    Aetna CEO Mark Bertolini said at the J.P. Morgan conference that he found out many of his company's employees relied on food stamps or had children covered via Medicaid—despite working at one of the most profitable companies in the country.

    “That's really about inspiring our employees and paying it forward,” said Bertolini, who made $30.7 million in 2013, including stock options and awards.

    For Aetna, the move represents a relatively small investment, costing about $25 million next year. But Bertolini believes it can at least partially defray the $120 million in turnover costs that Aetna absorbs every year.

    Aetna's peers aren't buying into the minimum-wage strategy. Anthem CEO Joseph Swedish said there have not been many conversations about the issue because the company believes its wages are in line with market rates. He did not say if Anthem had a company-set minimum wage.

    “We've continually focused on providing competitive wages,” Swedish said. “I can't speak to how (Aetna) calibrates their wage structure. But I feel very good about our wage compensation and benefit plan we offer to associates.”

    Humana CEO Bruce Broussard struck an identical tone, saying Humana's salaries and benefits to employees are competitively priced. “I don't think we're going to go where Aetna has gone to,” he said.

    Molina Healthcare, a Medicaid insurer, likewise will not institute a minimum wage like Aetna in the near future, said CEO Dr. J. Mario Molina. While employees are compensated appropriately, he said the company's goal of providing access to care for Medicaid members and other people who receive taxpayer-funded health insurance resonates more with the workforce.

    “This is a very mission-driven company,” Molina said. “A lot of the people who come to work for us are motivated by the mission.”

    Company-specific minimum wages are not without precedent. Costco and Gap have both instituted minimum pay rates for employees. In the healthcare sphere, home health workers have consistently asked for higher pay, although their demands have been tied up in the legal system.

    Most recently, Parkland Health & Hospital System in Dallas said this past summer that it raised the minimum wage of its entry-level employees to $10.25 an hour. The health system is paying for the higher wages through an executive incentive pool.

    Research shows wages for a vast majority of people have not kept pace with the recovering economy. Average wages have grown only by 0.7% since the beginning of 2010 when adjusted for inflation, according to the Bureau of Labor Statistics. Consequently, Americans have had to spend more of their stagnant household income on necessities, including healthcare services.

    Follow Bob Herman on Twitter: @MHbherman

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