Massachusetts Blues halts directors' pay, reconsiders nonprofit status


Amid the outrage over Blue Cross Blue Shield of Massachusetts's $11 million payout to its former chief executive, the insurer has suspended payments to its board of directors.

"Obviously, this has become a great distraction," Blue Cross CEO Andrew Dreyfus told the Boston Globe. He said he called for an emergency board meeting to discuss payments because "it was important that they make a statement."

In 2010, Blue Cross's 18 directors were paid between $11,000 and $84,000 each, with 14 of them receiving between $60,000 and $76,000, reports Bloomberg Businesweek. The suspension of directors' compensation will last at least until the end of the year and the fee won't be made retroactive if it is reinstated. "If at the end of that conversation, the community expectations are that our board should not be paid, then I'm willing to accept that," Dreyfus said.

Attorney General Martha Coakley, who launched a 2009 investigation into the practice of paying board members of nonprofit health insurance companies, said the Blue Cross move was encouraging. She urged the state's three other nonprofit health insurers--Harvard Pilgrim, Tufts Health Plan and Fallon Community Health Plan--to follow suit and stop paying their directors. All three insurers said their board members will meet later this month to discuss whether to stop taking annual payments, notes the Globe.

Blue Cross also may seek to break away from its public charity status and financial disclosure requirements because, while classified as a nonprofit public charity, it pays state and federal taxes, doesn't accept donations or grants, and operates like a complex business. The nonprofit label creates expectations that the insurer, which competes against for-profit companies, "will operate like museums, universities and human services organizations," according to Businessweek.

But Coakley warned that Blue Cross "can't take the advantages of being a not-for-profit and take the advantages of being a for-profit," reports the Boston Herald. She said the insurer has two choices right now--either stay organized as a not-for-profit, preferably suspending director pay indefinitely, or organize as a for-profit through a statutory change.

Dreyfus said Blue Cross has no interest in losing its nonprofit status. He suggested instead that the insurer could either remain a nonprofit, but drop its designation as a public charity, or become a member-owned mutual insurance company.

To learn more:
- read the Boston Globe articles on Blue Cross and on Harvard Pilgrim, Tufts
- see the Bloomberg Businessweek story
- view the Boston Herald article

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