Why Angela Braly, CEO of the WellPoint Insurance Co., Deserves a Raise

Angela Braly, CEO of  health insurance giant WellPoint, deserves a raise. As regular readers of this column know, Ms. Braly did not make as much as Aetna’s Ronald A. Williams in 2008.

In a post written back in May of 2009 I noted of Insurance Company CEO Total Compensation:

Aetna’s Ronald Williams received $24,300,112 last year. That’s $467,309.85 per week. That’s a house. Maybe not a house that Mr. Williams would live in, but a house nonetheless. The man makes a house a week. And interestingly enough, if Mr. Williams were to eschew the purchase of a house on any given week and instead look to deposit the money in a bank– in order to remain FDIC insured (up to $250,000)– he would actually need to open more than one account–every week. Lest we lament the fate of the other CEOs on the list, in 2008 Ms. Braly had to get by on $189,311.76 per week….

Less than half of what Mr. Williams brought in, in 2008 Ms. Braly was forced to make ends meet on $9,844,212.

In 2007, her first year on the job: $9,094,271. Which, for those keeping score at home, is $174,889.83 per week. Her predecessor at Wellpoint, Larry Glasscock, received  $23,886,169 in total compensation in 2006. Again, in 2008 Ms. Braly had to get by on $189,311.76 per week. True, it was $14,421.93 more per week than she had made the year prior, but that won’t be nearly sufficient for this year.

So why does Angela Braly deserve a raise? Pay so high that the  FDIC limits on insurance (yes, it’s somewhat ironic) won’t work for her weekly paycheck? Because WellPoint subsidiary Anthem Blue Cross of California has found the audacity to raise individual insurance premiums in that state 39%. That’s right, 39%. This, according to Secretary of Health and Human Services Kathleen Sebelius, “as WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.”

Profits “soar,” raise rates. What more could Wall Street want?

Secretary Sebelius has demanded “justification” for the increase. In a letter sent to the Wellpoint subsidiary Anthem Blue Cross, she writes:

One of the biggest pressures facing families, businesses and governments at every level are skyrocketing health insurance costs.  With so many families already affected by rising costs, I was very disturbed to learn through media accounts that Anthem Blue Cross plans to raise premiums for its California customers by as much as 39 percent. These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

Your company’s strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.

And there you have it, profits soar, raise rates, the stock soars–as will, presumably, Ms. Braly’s stock options. She won’t have “to get by on $189,311.76 per week” for all that much longer. With that kind of move it’s only a matter of time before she finds herself in Mr. Williams’ neighborhood.

Now that the healthcare reform debate awaits its Summit, from the vantage point of its nadir, one might imagine other Insurance Company CEO’s to embark upon a similar strategy. Good thing we jettisoned all those proposed pesky insurance regulations contained in the House & Senate bills.

Because it never gets old to me, here’s the list of Insurance Company CEO Total Compensation:

Res Ipsa Loquitur.

Ins. Co. & CEO With 2007 Total CEO Compensation

• Aetna Ronald A. Williams: $23,045,834
• Cigna H. Edward Hanway: $25,839,777
• Coventry Dale B. Wolf : $14,869,823
• Health Net Jay M. Gellert: $3,686,230
• Humana Michael McCallister: $10,312,557
• U.Health Grp Stephen J. Hemsley: $13,164,529
• WellPoint Angela Braly (2007): $9,094,271
  L. Glasscock (2006): $23,886,169

Ins. Co. & CEO With 2008 Total CEO Compensation

• Aetna, Ronald A. Williams: $24,300,112
• Cigna, H. Edward Hanway: $12,236,740
• Coventry, Dale Wolf: $9,047,469
• Health Net, Jay Gellert: $4,425,355
• Humana, Michael McCallister: $4,764,309
• U. Health Group, Stephen J. Hemsley: $3,241,042
• Wellpoint, Angela Braly: $9,844,212

See Nonprofit Health Related CEO Compensation Here.

Medical Expense for a Family of Four Rises

Yesterday we took a look at Health Insurance CEO pay, and noted that Mr. Ronald Williams of Aetna made $467,309.85 per week in 2008, while Ms. Braly of Wellpoint was left to make ends meet on $189,311.76 per week, and Mr. Hemsley of United Health was forced to manage on  $62,327.73 per week (though one might hope that Mr. Hemsley had the presence of mind to put a little something away the year prior when he had made $253,164.02 per week).

Today we take a brief look at how the other half lives. HealthCare Finance News reports that according to the Milliman Medical Index (MMI) the average medical bill for a typical family of four covered by an employer-sponsored preferred provider organization (PPO) program rose 7.4 percent from 2008 to 2009. In actual dollars:

The total 2009 medical bill for a typical American family of four is $16,771, compared with the 2008 figure of $15,609. The $1,162 increase is the highest measured by the MMI since the 2006 increase of $1,168, when cost trends were at 9.6 percent.

The MMI found that employers are expected to pay $9,9947, or 5.4 percent more than in 2008, while employees are expected to contribute $4,004 toward their health costs, an increase of 14.7 percent, and pay $2,820 in out-of-pocket expenses, an increase of 5.4 percent.

According to Health and Human Services: “The estimated median income for a four-person family living in the United States is $70,354 for FFY 2009″ (slightly more than Mr. Hemsley’s weekly paycheck). According to the MMI, of that $70,000, nearly $7,000 in employee wage goes to healthcare expense. That’s 10 per cent or $583.33 per month. That’s more than enough to make the payment on a brand new Cadillac.

In addition, one should also note that the employers’ contribution is nearly $10,000 per year, or $833.33 per month. Together, the actual total is $16,771 or $1397.59 per month. Which is to say that the average expense for medical for a family of four is $1400.00 per month. According to the Census Bureau, the average price of a house in the U.S. in March of 2009 was $201,400.00.

According to CNNMoney.com the current average for a 30 year fixed rate mortgage is 5.24% but rates are “all over the map.” We’ll use 7%. The monthly mortgage payment on $201,400 for a 30 year fixed rate at 7% is $1339.92. The average monthly medical expense amounts to $1397.59.

That’s a house. The average monthly medical expense for a family of four amounts to a house, maybe not one that Mr. Williams, Ms. Braly or Mr. Hemsley would live in, but a house nonetheless. Oh, and there’s still $57.67 left over– enough to catch the earlybird special at the Family Buffet.

Health Insurance Company CEOs Total Compensation in 2008

A few months back we posted the Total Compensation for a number of Health Insurance Company CEOs for 2007. Those numbers, culled from the companies’ SEC filings (Schedule 14A) appears immediately below. Below that are the numbers for 2008, courtesy of FierceHealthcare.com through Jan Rodolpho, RN.

As you can see, the year has brought decreases for some CEOs (but not all). One wonders, discretion being the better part of valor, if the clamor for health care reform and the pursuit of a Public Plan, has counseled caution –for the time being– regarding executive compensation. If the timing for further compensation has merely been adjusted so as to backload payments until after the health care reform debate is settled. Either way, the numbers pretty much speak for themselves. Perhaps a slight bit of context is in order, however: it has struck me that Aetna’s Ronald Williams received $24,300,112 last year. That’s $467,309.85 per week. That’s a house. Maybe not a house that Mr. Williams would live in, but a house nonetheless. The man makes a house a week. And interestingly enough, if Mr. Williams were to eschew the purchase of a house on any given week and instead look to deposit the money in a bank– in order to remain FDIC insured (up to $250,000)– he would actually need to open more than one account–every week. Lest we lament the fate of the other CEOs on the list, in 2008 Ms. Braly had to get by on $189,311.76 per week, and Mr. Hemsley had to somehow manage on $62,327.73 per week (but perhaps he was able to save a little from last year when he made $253,164.02 per week).

Res Ipsa Loquitur.

Ins. Co. & CEO With 2007 Total CEO Compensation

• Aetna Ronald A. Williams: $23,045,834
• Cigna H. Edward Hanway: $25,839,777
• Coventry Dale B. Wolf : $14,869,823
• Health Net Jay M. Gellert: $3,686,230
• Humana Michael McCallister: $10,312,557
• U.Health Grp Stephen J. Hemsley: $13,164,529
• WellPoint Angela Braly (2007): $9,094,271
  L. Glasscock (2006): $23,886,169

Ins. Co. & CEO With 2008 Total CEO Compensation

• Aetna, Ronald A. Williams: $24,300,112
• Cigna, H. Edward Hanway: $12,236,740
• Coventry, Dale Wolf: $9,047,469
• Health Net, Jay Gellert: $4,425,355
• Humana, Michael McCallister: $4,764,309
• U. Health Group, Stephen J. Hemsley: $3,241,042
• Wellpoint, Angela Braly: $9,844,212

See Nonprofit Health Related CEO Compensation Here.

Update: “Why WellPoint’s Angela Braly Deserves A Raise”