Families USA Study Examines Executive Compensation in Managed Care

As Insurance Industry Argues Consumer Protections are Too Costly, Executives Take Home Millions

While managed care companies complain about the cost of establishing basic consumer protections, their top executives made many millions of dollars in 1996, according to a new study released today by the national health care consumer group Families USA.

Premium Pay: Corporate Compensation in America's HMOs is based on filings to the Securities and Exchange Commission for the 20 for-profit, publicly traded companies that owned HMOs with enrollments over 100,000 in 1996. The report found that Stephen Wiggins, former CEO of Oxford Health Plans, was the highest paid executive that year. In 1996, Mr. Wiggins received $29.1 million in compensation, and held an additional $82.8 million in unexercised stock options. Key findings of the report include:

• In 1996 the 25 highest paid HMO executives among these companies had an average compensation, exclusive of unexercised stock options, of over $6.2 million. The median compensation was over $4.8 million [see attachment 1].
• The 25 HMO executives with the largest stock option packages in 1996 held unexercised stock options averaging $13.5 million per executive. The median value of the unexercised stock options for those executives was $7.2 million [see attachment 2].

Ron Pollack, executive director of Families USA, stated: "When HMO executives make many millions of dollars in compensation, that may be okay. But when those same HMO executives complain about pennies being spent for basic consumer rights, that is pure hypocrisy."

A recent report by the Congressional Budget Office found that the Consumer Bill of Rights proposed by the Presidential Advisory Commission on Consumer Protection and Quality in the Health Care Industry would add only 0.3 percent to existing premiums.

Pollack, who also served on the President?s Advisory Commission, said: "Managed care companies are considerably more cost conscious when they oppose the establishment of consumer rights than when they approve compensation for their top executives. The health insurance industry?s protestations about costs appear to be highly selective -- and, some might say, disingenuous."

The report is based on data provided to the SEC by the 20 companies for their five or six (in those instances when an executive was replaced) highest paid executives. The 20 companies comprise all of the publicly traded insurance companies that own one or more HMOs with enrollments greater than 100,000 people.

The companies included in the study are: Aetna, ChoiceCare, CIGNA, Coventry, FHP International, Foundation Health, Health Systems International, Healthsource, Humana, Maxicare Health Plans, Mid-Atlantic Medical Services, Oxford Health Plans, PacificCare Health Systems, Physician Corporation of America, Physicians Health Services, RightCHOICE Managed Care, Sierra Health Services, United HealthCare, United Wisconsin Services, and WellPoint Health Networks.

The companies with the highest average compensation, exclusive of unexercised stock options, per top executive were: Oxford Health Plans ($11.7 million); Aetna ($5.7 million); CIGNA ($5.1 million); WellPoint Health Networks ($3.3 million); and Foundation Health ($2.3 million). All averages are for top five or six (in those instances when an executive was replaced) highest paid executives.

The companies with the highest average unexercised stock options per top executive were: Oxford Health Plans ($29.5 million); United HealthCare ($11.2 million); CIGNA ($6.9 million); PacificCare Health Systems ($5.5 million); and Aetna ($4.8 million).

Pollack described the per-HMO-enrollee income for the top-paid executives in different companies. For Oxford Health Plans, the per-enrollee income for the company?s highest-paid executives, exclusive of unexercised stock options, is $40.30 per enrollee in 1996. At CIGNA it is $11.11 per enrollee, and at Aetna it is $7.06 per enrollee [see attachment 3]. In contrast, the President?s Commission estimated that the right to an independent appeal of health services denials by HMOs ? a key right in the proposed Consumer Bill of Rights ? costs from four (4) cents to 84 cents per HMO enrollee per year.

"The per-enrollee costs of a consumer right to appeal and many other basic protections are a fraction of the per-enrollee income made by top HMO executives," said Pollack. "If the HMO and insurance industry truly cares about improving health care for America?s families, it should shift some of the money spent on executive compensation to improve consumer protection and coverage."

Attachment 1:

The 25 Highest Paid HMO Executives
1996 Annual Compensation Exclusive of Unexercised Stock Options

1. Stephen Wiggins, CEO, Oxford Health Plans, Inc.-$29,061,599
2. Wilson Taylor, Chairman and CEO, CIGNA Corporation-11,568,410
3. David Snow, Executive Vice President, Oxford Health plans,Inc.-10,403,451
4. Robert Smoler, Executive Vice President, Oxford Health Plans, Inc.-10,085,972
5. William Sullivan, President, Oxford Health Plans, Inc.-7,823,076
6. Joseph Sebastianelli, President, Aetna, Inc.-7,394,506
7. Michael Cardillo, Executive Vice President, Aetna, Inc.-7,069,969
8. Leonard Schaeffer, Chairman and CEO, WellPoint Health Networks, Inc.-7,010,698
9. George Jochum, President and CEO, Mid-Atlantic Medical Services, Inc.-6,526,065
10. Ronald Compton, Chairman and CEO, Aetna, Inc.-5,813,287
11. Wayne Smith, Former President, Humana, Inc.-5,166,575
12. James Stewart, Executive Vice President, CIGNA Corporation-4,832,799
13. Richard Huber, Vice Chairman, Aetna, Inc.-4,801,841
14. Roger Taylor, Executive Vice President, PacifiCare Health Systems, Inc.-4,103,864
15. Daniel Crowley, CEO and President, Foundation Health Corporation-3,849,023
16. Gerald Isom, President, Property and Casualty, CIGNA Corporation-3,778,293
17. Alan Hoops, President and CEO, PacifiCare Health Systems, Inc.-3,221,602
18. Daniel Kearney, Executive Vice President, Aetna, Inc-3,189,272
19. D. Mark Weinberg, Executive Vice President, WellPoint Health Networks, Inc.-3,009,944
20. Donald Levinson, Executive Vice President, CIGNA Corporation-2,985,017
21. Ronald Williams, Executive Vice President, WellPoint Health Networks, Inc.-2,827,381
22. Allen Wise, Executive Vice President, United HealthCare Corporation-2,697,751
23. Jeffrey Elder, Senior Vice President, Foundation Health Corporation-2,235,783
24. H. Edward Hanway, President CIGNA HealthCare, CIGNA Corporation-2,217,711
25. Kirk Benson, President and COO, Foundation Health Corporation-2,104,414

Attachment 2:

The 25 Executives with the Largest
Unexercised Stock Option Packages in 1996

1. Stephen Wiggins, CEO, Oxford Health Plans, Inc.-$82,799,000
2. William McGuire, CEO, United HealthCare Corporation-50,042,237
3. David Snow, Executive Vice President, Oxford Health Plans, Inc.-23,888,000
4. William Sullivan, President, Oxford Health Plans, Inc.-20,408,000
5. Alan Hoops, President and CEO, PacifiCare Health Systems, Inc.-15,338,120
6. Robert Smoler, Executive Vice President, Oxford Health Plans, Inc.-14,015,000
7. Wilson Taylor, Chairman and CEO, CIGNA Corporation-12,057,758
8. Samuel Miller, Executive Vice President, United Wiscon

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Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans.

1201 New York Avenue NW, Suite 1100 · Washington, DC 20005
202-628-3030 · Email: info@familiesusa.org · www.familiesusa.org