Human Capital & Careers

State to Probe Non-Profit Pay Package

Maryland's new insurance commissioner wants to know more about a big payout due the former CEO of CareFirst BlueCross Blue Shield.
Stephen TaubOctober 25, 2007

Hefty compensation packages are not just irking the usual cast of shareholder activists. The Maryland Insurance Commissioner said he will hold a hearing to investigate the proposed payout for the former CEO of a not-for-profit insurance company.

Ralph Tyler, who was appointed insurance commissioner in September, announced on Wednesday that he wants to determine whether the $17.6 million package that former CareFirst BlueCross BlueShield CEO William Jews is scheduled to receive is a fair and reasonable use of the company’s assets. The commissioner is reportedly citing a Maryland law that prohibits insurers from making excessive payments to executives.

“My responsibility is to make sure that CareFirst’s assets are used in accordance with the law,” Tyler said in a statement. “I intend to hold a hearing and give this important issue careful and deliberate consideration.” A hearing date has not been scheduled.

The company stated that $17.6 million of the payout referenced by the commission is made up of $12.6 million in retirement benefits and deferred compensation that Jews earned over 13½ years as CEO, and $5 million in severance payments. “We believe that the payments due Mr. Jews are consistent both with the requirements under his employment agreement and with the ‘fair and reasonable’ standard established under Maryland law,” added the company

Currently, Jews’ package is now worth about $18.4 million after factoring in interest.

CareFirst is an independent licensee of the Blue Cross and Blue Shield Association and a not-for-profit health care company. Jews joined Blue Cross and Blue Shield of Maryland in 1993 after its chief executive quit amid charges of mismanagement and lavish spending, according to a report by the Associated Press.

Jews is credited with restoring the company’s financial health and spearheading the merger that created CareFirst in 1998. He resigned in November 2006.

This is not the first time the Maryland Commissioner has investigated CareFirst. In September, Tyler announced in a what the state calls a market conduct report, and resulting consent order with CareFirst, that the company had been improperly denying claims in violation of Maryland law.

The insurer was fined $125,000 for violating state law and ordered to correct the business practices that led to the errors. “This is the first time that the MIA has conducted a focused audit of how denied claims are being processed by health carriers,” said Tyler at the time. “Because some of these issues may exist at other carriers and warrant additional investigation, we will be examining other carriers,” he continued

Also last month, Tyler said he wanted to hold a hearing relating to a proposal submitted by Medical Mutual Liability Insurance Society of Maryland to pay a $68 million dividend, including a portion of the dividend owed to the state. Medical Mutual declared the dividend on September 12. “I need a greater opportunity to review and digest this proposal,” said Tyler. “With this amount of money at stake, I want to be sure that it is handled appropriately.”

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