Are your health insurance premiums being used to pay a $10 million CEO salary?
When you are trying to support your family of four on $50,000, it can seem slightly obscene to consider what some of the nation's top earners make. Really, what does rapper Jay-Z plan to do with his $63 million? It may be difficult to stomach some of the entertainment salaries, but at least that money isn't necessarily coming out of your pocket. Now, a new Wall Street Journal survey reveals that as far as CEO salaries go, health care executives top the list. And you wondered why your health insurance rate was so high.
Top Medical Insurance CEO Salaries
When reviewing compensation for CEOs, it is important to remember that executives are paid both directly and indirectly. In addition to a salary and bonuses, they may also receive retirement investments, use of company aircraft and other perks. In terms of total direct compensation--including base salary, bonuses and stock grants--here's how well some of the nation's largest health insurance companies paid their CEOs in 2009:
- Humana: $6.2 million
- Cigna: $5.6 million
- Coventry Health Care: $16.5 million
- Aetna: $15.3 million
- UnitedHealthGroup: $9.5 million
- Wellpoint: $12.8 million
What's more, many CEO compensation packages increased significantly from 2008 to 2009. WellPoint's direct compensation package went up by 60 percent while compensation for the UnitedHealthGroup CEO rose by a staggering 198 percent.
Together with CEOs from related businesses such as Pfizer and Abbot Laboratories, CEO compensation in the health care industry topped the Wall Street Journal survey with a median income of $10 million. That's more than CEOs in retail, utilities and even the financial sector.
Reducing Salaries to Create Low Cost Health Insurance
Rising administrative costs is one problem that health care reform has set out to tackle. In 2011, health insurance companies will be required to spend 80-85 percent of their premium dollars on direct patient care. This percentage, referred to as a medical loss ratio, is one of the more controversial aspects of health care reform…at least as far the health insurance companies are concerned.
Insurers argue that patient care goes beyond what happens in the doctor's office. In their opinion, the costs of doing business--from insurance agent broker fees to medical coding input--should count toward the 80-85 percent requirement. However, the National Association of Insurance Commissioners, which was charged with determining what constitutes direct patient care took a pass on most of industry-supported amendments when putting together its definition.
Cracking down on how health insurance companies use their premium dollars is intended to ensure that your health insurance rate isn't going up every year simply to pad the company bottom line and compensate the folks on top. While some states already have their own laws regarding medical loss ratios, the Affordable Care Act creates a nationwide standard that will hopefully keep low cost health insurance available for American families.
Of course, it never hurts to compare insurance quotes if you are one of those expected to see health insurance premiums rise by double digits next year. As the health insurance landscape continues to change with the implementation of health care reform, keeping your options, and your eyes, open might be the best way to snag that affordable health insurance plan.Tags : health care reform, medical loss ratios, health care salaries