Health insurer CEOs score 2016 pay raises despite uncertain future
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Lilly: Drug can prevent COVID-19 illness in nursing homes
      Mobile labs take vaccine studies to diverse neighborhoods
      Biden to sign virus measures, requires mask use to travel
      vaccine shot injection_i_i.jpg
      11,900 COVID-19 vaccine doses ruined en route to Michigan
    • Lilly: Drug can prevent COVID-19 illness in nursing homes
      Mobile labs take vaccine studies to diverse neighborhoods
      Biden to sign virus measures, requires mask use to travel
      vaccine shot injection_i_i.jpg
      11,900 COVID-19 vaccine doses ruined en route to Michigan
    • Louisiana gets reports vaccine providers are discriminating
      'We know this is real': New clinics aid virus 'long-haulers'
      The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      Trenda Ray
      Q&A: Arkansas nursing leader looking for creative staffing solutions as COVID cases surge
    • UnitedHealthcare operating earnings fall by $2 billion in Q4
      CMS approves rule forcing insurers to ease prior authorization
      COVID-19 still a big uncertainty for insurers in 2021
      Health insurers' outlook boosted after Dems' Georgia win
    • Biden signs executive orders to reverse, pause Trump-era rules
      CMS finalizes blood-based colon cancer screening coverage
      As virus surges, states reporting shortages of vaccine
      New CDC director takes over beleaguered agency amid crisis
    • Providers await new HHS coronavirus grant reporting deadline
      Operation Warp Speed Dr. Moncef Slaoui, Pfizer Group President Angela Hwang, Moderna CEO Stephane Bancel, CVS Health Executive Vice President Karen Lynch and McKesson CEO Brian Tyler participate in a panel discussion on the COVID-19 vaccine.
      Hospitals, drug companies strive to stand out virtually at JPM
      Intermountain, Trinity, Memorial Hermann behind $300M private equity fund
      Operation Warp Speed to bump up McKesson's stock price
    • A man in a room with servers.
      Momentum grows to outsource hospital tech functions in 2021
      5 things to know about Google's $2.1B Fitbit acquisition
      Providence bets on machine-learning, consolidating data centers
      Mental health treatment was most common telehealth service during COVID
    • Mobile labs take vaccine studies to diverse neighborhoods
      As virus surges, states reporting shortages of vaccine
      Sticking to Mediterranean diet is good for the brain
      Chance of COVID-19 triage care looms over Arizona hospitals
    • Elizabeth Richter will serve as acting CMS administrator
      Providence names new chief financial officer
      Wisconsin's top health official departing for federal job
      Cone Health CEO, CFO to depart amid pending Sentara merger
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • InDepth Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
      Yale New Haven's COVID-19 nurse-staffing model has long-term benefits
    • Dr. James Hildreth
      How medical education can help fight racism
      Modern Healthcare InDepth: Breaking the bias that impedes better healthcare
      Videos: Healthcare industry executives describe their encounters with racism
      Michellene Davis
      Healthcare leadership lacks the racial diversity needed to reduce health disparities
      Quotes from rebadged employees
      Outsourcing IT, revenue cycle takes toll on internal culture
    • A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      self service station
      COVID-19 pushes patient expectations toward self-service
      Targeting high-risk cancer patients with genetics
      A nurse holds up a phone with a message to a family member saying surgery has started.
      Texting, tablets help hospitals keep family updated on patient care
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Highmark Health inks six-year cloud, tech deal with Google
      Study: 1 in 5 patients report discrimination when getting healthcare
      HHS proposes changing HIPAA privacy rules
      Android health records app launches at 230 health systems
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
      New care model helps primary-care practices treat obesity
      How hospitals are building on COVID-19 telehealth momentum
      Researchers: Hospital price variation exacerbates health inequities
    • MedPAC votes to boost hospital payments, freeze or cut other providers
      Most Next Gen ACOs achieved bonuses in 2019
      Congress recalibrates Medicare Physician Fee Schedule after lobbying
      CMS approves rule to encourage value-based drug pricing
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
      Dr. Bruce Siegel
      Why taking a hospital not-for-profit was Dr. Bruce Siegel’s boldest move
    • Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
      Mark C. Clement and David Cook
      We all need to 'do something' to fight inequities and get healthcare right, for every patient, every time
    • Dr. Bruce Siegel
      By protecting the healthcare safety net, Biden can put us on the path to a stronger country
      Healing healthcare: some ideas for triage by the new Congress, administration
      Dr. Sachin H. Jain
      Medicare for All? The better route to universal coverage would be Medicare Advantage for All
      Connectivity: a social determinant of health that can exacerbate all the others
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - Health Care Hall of Fame
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Top 25 Minority Leaders
    • Top 25 Women Leaders
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • Leadership Symposium
    • Healthcare Transformation Summit
    • Women Leaders in Healthcare Conference
    • Workplace of the Future Conference
    • Strategic Marketing Conference
    • Social Determinants of Health Symposium
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala (2022)
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
      Next Up Podcast: COVID-19, social determinants highlight health inequities — what next?
      Ceci Connolly
      Next Up Podcast: How to navigate the murky post-election waters
      Next Up Podcast: Saving Rural Health
    • An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
      doctor burnout
      Beyond the Byline: How healthcare supply chain struggles contribute to employee burnout
      Beyond the Byline: Covering race and diversity in the healthcare industry
      Beyond the Byline: How telehealth utilization has impacted investor-owned company earnings
    • Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Chip Kahn
      The Check Up: Chip Kahn of the Federation of American Hospitals
      The Check Up: Trenda Ray
      The Check Up: Trenda Ray of the University of Arkansas for Medical Sciences
      The Check Up: Dr. Kenneth Davis
      The Check Up: Dr. Kenneth Davis of Mount Sinai Health System
      The Check Up: Dr. Thomas McGinn
      The Check Up: Dr. Thomas McGinn of CommonSpirit Health
    • Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Finance
April 27, 2017 01:00 AM

Health insurer CEOs score 2016 pay raises despite uncertain future

Shelby Livingston
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Bertolini

    In 2016, the health insurance industry braced for tremendous change. President Donald Trump and his administration promised to upend the regulatory framework insurers had been operating under for six years. The Affordable Care Act's insurance exchanges were depleting many big insurers, sparking millions in reported losses. Anthem and Aetna failed to alter the insurance landscape in proposed mergers with Cigna Corp. and Humana, respectively.

    In a rocky year for the industry, the CEOs were rewarded for ensuring their companies weathered the storm by delivering revenue and earnings growth despite the chaos.

    Most of the CEOs at eight of the largest publicly traded insurance companies got a pay raise last year. Combined, those eight executives made $171.8 million in total compensation in 2016 based on realized stock gains, essentially unchanged from last year, according to a Modern Healthcare analysis of company proxy statements filed with the Securities and Exchange Commission.

    The analysis included Aetna, Anthem, Cigna Corp., Centene Corp., Humana, Molina Healthcare, WellCare Health Plans and UnitedHealth Group. Companies report total compensation, which comprises salary, stock and option awards, bonuses and other compensation. But those stock and option awards may not be realized for a few years. Realized compensation, however, takes into account stock vested and options exercised during that year.

    For some context, the CEOs' combined 2016 realized compensation would be enough to cover the average annual premium for about 59,150 people enrolled in the most popular plan on the HealthCare.gov federal marketplace last year before financial assistance.

    Executive compensation at the leading publicly traded health insurance companies has been climbing for years, said Mike Halloran, senior partner in executive compensation at consulting firm Mercer. The pay tracks closely with the size and scale of the companies, many of which have grown dramatically in terms of revenue.

    Moreover, "the health care market in general is competitive right now for talent," Halloran said. Insurers are rapidly consolidating, and the companies are looking for talent that can manage operations on a larger scale.

    For example, Aetna's revenue nearly doubled to $63.1 billion last year from $34.2 billion in 2010, when Mark Bertolini took over as CEO. Bertolini made $41.7 million in 2016 based on realized stock gains, while he made $10.6 million his first year at the helm of the company. Last year, he made the most of all the CEOs analyzed.

    Bertolini's pay increased in 2016 despite several stumbles during the year. Like many other insurers, Aetna struggled to turn a profit on the ACA's insurance exchanges. It lost $450 million from the individual exchange plans in 2016.

    The $37 billion tie-up with Humana, which Bertolini spearheaded, ultimately failed after a federal court blocked the deal saying it would harm competition. It was an expensive failure: In 2015 and 2016, Aetna spent $775 million in transaction and integration-related fees, according SEC documents. Moreover, Aetna had to pay Humana a $1 billion breakup fee.

    Still, Aetna's board of directors rewarded Bertolini an annual bonus at 115% of his target for delivering "strong financial performance," growing membership, and expanding the Medicare Advantage footprint. Aetna's 2016 revenue grew by 4.7% over 2015, though its profit dropped by 5% year over year to $2.3 billion.

    Health Insurers CEOs

    Humana CEO Bruce Broussard's pay increased dramatically to $17 million from $4.8 million in 2015. The spike was largely due to Broussard cashing in on stock awards from years past.

    He was also rewarded by the board for delivering 2016 adjusted earnings per share of $9.57, up from the target of $8.85, "despite an extremely challenging operating environment due to our proposed merger agreement with Aetna," the company's proxy filing states. That adjusted figure excluded costs related to the Aetna merger and the payments Humana is owed under the ACA's risk corridor program. Humana spent about $127 million in 2015 and 2016 in fees related to the Aetna deal.

    It's not surprising that neither Bertolini or Broussard's pay suffered from the failure of the merger. Betsy Field, a senior executive compensation consultant at risk management firm Willis Towers Watson noted that "typically you wouldn't see completing a merger as a goal in your annual or long-term incentive plan."

    Still, Broussard's total pay ballooned despite lower profit. Humana's 2016 profit was $614 million, down from $1.3 billion in 2015, due to membership losses in Humana's individual commercial and group Medicare Advantage plans. Humana drastically reduced the individual plans it sold on and off the ACA exchanges in 2016.

    Anthem likewise struggled with ACA exchange plan losses, but that didn't hurt CEO Joseph Swedish's paycheck. He made $17.1 million in total pay based on actual stock gains.

    That's up 8.5% over 2015, even though Anthem's $54 billion deal with Cigna didn't pan out. The merger is still pending in appeals court after a lower court judge blocked it for threatening competition in the national employer market.

    "Compensation increases for Mr. Swedish were implemented to recognize his performance," an Anthem spokeswoman explained.

    Swedish received a $2.8 million bonus in 2016, largely for meeting the company's adjusted earnings per share goal of $11 per share. That measure is weighted at 85% of the bonus. Anthem revenue totaled $84.9 billion, up 7.2% year over year. Profit fell 3.5% over 2015 to $2.5 billion.

    About 90% of the typical health insurer CEO's pay is tied to the financial performance of the company, Halloran said. Of that, the lion's share of incentive pay is stock performance. If shareholders are happy, top executives get paid the big bucks.

    Cigna CEO David Cordani's pay was slashed by more than half last year. He made $22 million in 2016, down from $49 million the year before when he cashed out a lot of stock.

    The swing in pay also reflects Cigna's failure to meet its financial goals. Cordani earned just 50% of his target annual bonus because the company didn't meet goals for adjusted income from operations, which slipped to $2.3 billion in 2016 from $2.4 billion the year before, or the operating expense ratio.

    Stephen Hemsley, head of the nation's largest health insurer UnitedHealth, made $33.4 million in total compensation based on realized stock gains, up 66.1% over 2015.

    Hemsley's non-equity bonus was $4.9 million because the company beat performance goals for revenue and operating income. The company also met target goals for employee engagement and teamwork, which are measured based on survey results. UnitedHealth recorded 2016 revenue of $184.8 billion, up 17.6% year over year.

    At the same time, UnitedHealth rewarded Hemsley for enrolling almost 2.2 million new members during the year and improving its Medicare Advantage star ratings, according to the proxy. The company's adjusted earnings per share grew by 25% in 2016 to $8.05, with total shareholder return at 38%, "reflecting continued successful performance in an uncertain environment," the proxy noted.

    Centene CEO Michael Neidorff earned slightly less than Hemsley at $32.2 million, down 27% over last year. His stock gains were lower than in 2015, accounting for most of the decrease in pay.

    But despite the Medicaid insurer's stock price falling 14% in 2016, Neidorff still earned a $3.9 million annual bonus.

    The proxy cited Neidorff's role in closing the company's $6 billion acquisition of insurer Health Net, making Centene the largest Medicaid insurer in the country by membership and revenue. The deal helped boost the combined company's revenue by 78% to $40.6 billion over 2015. Centene's total membership was 11.4 million in 2016, an increase of 6.3 million members over 2015.

    Kenneth Burdick of WellCare Health Plans made $4.7 million, up from $3.3 million the year before. His annual bonus was $2.7 million, or 183% of the target, for meeting financial—revenue and earnings per share, for instance—and quality goals, like customer satisfaction.

    Molina CEO Dr. J. Mario Molina's pay totaled $3.8 million, about half of what he made the year before. The lower pay "represented a disappointing year with respect to our financial results," the proxy stated. While Molina's revenue increased to $17.8 billion in 2016, the company didn't reach predetermined goals for net profit margin and earnings before interest, tax, depreciation and amortization, or EBITDA.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Providers await new HHS coronavirus grant reporting deadline
    Providers await new HHS coronavirus grant reporting deadline
    Hospitals, drug companies strive to stand out virtually at JPM
    Hospitals, drug companies strive to stand out virtually at JPM
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • InDepth Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Top 25 Minority Leaders
        • Top 25 Women Leaders
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Leadership Symposium
        • Healthcare Transformation Summit
        • Women Leaders in Healthcare Conference
        • Workplace of the Future Conference
        • Strategic Marketing Conference
        • Social Determinants of Health Symposium
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala (2022)
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing