Larry Merlo, the chief of pharmacy chain CVS Health, which recently acquired insurer Aetna, made $36.5 million, a 66.1% increase over 2018, according to the company proxy. But a spokesman explained that Merlo's reported pay is misleading because CVS changed how it reports compensation, resulting in some of Merlo's long-term incentive awards being counted twice.
Further, CVS gave Merlo long-term stock awards earlier than planned to reflect the company's Aetna acquisition and initiatives to transform care, such as opening its HealthHUB expanded clinics inside some CVS drugstores. Absent those factors, Merlo's compensation was closer to $19.6 million.
"We're creating a higher-quality, simpler and more affordable healthcare experience for the millions of Americans we interact with every day, in normal circumstances and in times of need. That progress was reflected in our 2019 executive compensation, the vast majority of which was performance-based," the spokesman said in an emailed comment.
As reported last month, Michael Neidorff, CEO of Centene Corp., received $26.4 million in total compensation last year, an increase of 1.2% over his 2018 pay. Cigna Corp. CEO David Cordani made $19.3 million, up about 2% over the year before, and Humana chief Bruce Broussard made $16.7 million, an increase of 2.5%.
A Humana spokesman said the insurer pays its executives to reflect financial performance and health outcomes.
Compensation for the seven CEOs have ballooned as their companies have become much more than health insurers. Many of the firms have acquired or been acquired by non-insurance businesses, such as pharmacy chains and pharmacy benefit managers. Several have branched into healthcare delivery, buying up primary care clinics and home health agencies.
Beyond CVS' merger with Aetna, in recent years Cigna bought pharmacy benefit manager Express Scripts, while Centene acquired rival insurer WellCare Health Plans. Humana purchased stakes in home health and hospice companies while building out primary-care clinics, and Anthem developed its own in-house PBM called IngenioRx. UnitedHealth's Optum business has continued to grow its army of physicians. The company employs, manages or contracted with 50,000 doctors in 2019.
Collectively, the seven companies analyzed reported $35.6 billion in profit on revenues of $913.1 billion in 2019. That's a significant increase compared with 2018, when they reported combined profit of $21.5 billion on revenue of $697.5 billion.
Executive compensation is typically made up of salary, cash incentive payments, equity awards and other compensation, such as company contributions toward a retirement plan or insurance policy. An executive's pay for a year doesn't necessarily reflect what that person took home, as equity awards may not become available for several years.
Sometimes, what a CEO actually brought home differs greatly from the reported total compensation. In UnitedHealth CEO Wichmann's case, for example, Wichmann's "realized" pay—factoring in stock awards vested and option awards exercised during 2019—totaled $52.1 million.