Insurer boosts board pay

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John Doyle Jr. made out well in his part-time job last year, pulling in $114,475 for serving as chairman of the governing board for Lifetime Healthcare Cos. and Excellus BlueCross BlueShield.

Doyle, a former Monroe County legislator whose day job is president and CEO of Doyle Securities Inc., stepped down as Excellus chairman at the end of last month. A six-year veteran of the governing board, he previously served a decade as an Excellus director.

Doyle, who made $71,463 for heading the governing board in 2008, got a 60.2 percent bump in pay. After the board voted itself a raise, the 17-member body’s average increase was 36.8 percent.

Governing board members collectively made $1.1 million last year, up 37 percent from $795,638 in 2008.

Doyle’s successor as chairman of the governing board is Randall Clark, a Buffalo executive who heads Dunn Tire LLC. Clark steps up from the board’s co-chairmanship. The Blues paid Clark $69,625 last year, a 32 percent hike over the $52,748 he made as a board member in 2007.

As chairman, Doyle made the most of any governing board member in both years. His colleagues collected paychecks ranging from $47,278 to $76,652 last year, documents filed with the state Department of Insurance show.

Governing board members attend a minimum of five two-day meetings annually and put in extra time for committee work. Each member gets a base amount along with extra cash for meeting attendance. Committee chairmen and the board chairman get further sums.

In addition to the 17-member governing board, Excellus has five regional boards with more than a dozen members each. In 2009, regional board members’ pay ranged from $1,700 to $7,150. Regional board members collectively made $213,647 last year, down 12 percent from $238,530 the year before.

The governing board’s vote to raise its own pay last year came on advice from Towers Watson & Co., a human resources consulting firm.

In a statement outlining its recommendations to the board’s compensation committee, Towers Watson said it looked at New York health care organizations, other Blue Cross Blue Shield organizations and companies with revenues of $3 billion to $12 billion.

The governing board-"part of talent pool (that) could seek comparably interesting positions for greater compensation"-was paying itself less than the median amount in its peer group and needed to up director pay if it wanted to keep and attract qualified members, the firm concluded.

Locally prominent members of the Lifetime/Excellus governing board include former Rochester Institute of Technology president Albert Simone, Home Properties of New York Inc. CEO Edward Pettinella and Paychex Inc. vice president Leonard Redon.

Public companies

The $1.3 million collected last year by the 17 governing board members compares with $1.3 million Xerox Corp. paid to its 10 outside directors in 2008, the most recent year for which Xerox has filed a proxy statement.

Individual Xerox board members’ pay ranged from $60,027 to $154,756. Splits between stock and cash compensation varied. One board member took $140,000 of a $146,087 package in stock. Another split a package evenly, taking $72,500 in stock and the same amount in cash.

Eastman Kodak Co. pays board members $210,000 to $310,000 a year. Each director gets a $70,000 base amount in cash and $140,000 in restricted stock and stock option awards. Heads of the Finance and Governance Committee and Compensation Committee get an extra $10,000 in cash. The Audit Committee chairman gets an extra $20,000. The board chairman gets an extra $100,000 in cash.

In recognition of challenging times, the Kodak board voted to make a 10 percent cut in the second of its members’ two annual cash payment installments in 2009, the company states in its most recent proxy.

The Lifetime/Excellus board’s 2009 pay hike came in a year when Excellus’ top executives saw substantial declines in pay after the company’s $54 million 2008 loss.

Director compensation differs from executive compensation, which is appropriately tied to financial performance, Towers Watson said.

"Director compensation programs in non-profit organizations are designed to deliver a stable value reflective of time commitment and do not fluctuate with the financial performance of the company," it said.

A non-profit

The question of whether non-profits should pay board members at all has been debated hotly in the non-profit community for years and remains an ongoing discussion, said Jennifer Leonard. Leonard is president and executive director of the Rochester Area Community Foundation, a roughly $29 million charitable non-profit.

Among organizations with tax-exempt status as 501(c)(3) charitable non-profits, the answer almost universally is no, Leonard said. But whether the same norm should apply to organizations such as the mostly non-profit Lifetime/Excellus group, whose revenues come from fees, is far from clear.

"(Non-profit) board service remains firmly rooted in volunteerism. By and large, non-profit board members are not compensated," states a 2007 study of non-profit compensation practices published by BoardSource, a Washington, D.C., organization that provides governance guidance and resource materials to some 600,000 U.S. non-profits that fall into the tax code’s 501(c)(3) category.

Larger and more complex non-profits such as health care and health insurance organizations are more likely to pay board members than smaller non-profits, the study found. Eleven percent of non-profits with annual budgets of $25 million or more paid their board members, while only 3 percent of all U.S. non-profits pay board members.

The Lifetime/Excellus group is a nearly $5 billion enterprise. It includes for-profit companies such as the MedAmerica Inc. national long-term care insurance company and several insurance and benefits-related businesses.

Lifetime Healthcare subsidiaries include non-profit physician group practices and medical service agencies, including the Lifetime Home Care and Hospice agency in Rochester.

More than $4.9 billion in premiums collected from enrollees in non-profit insurance plans accounts for most of Excellus’ revenues. Excellus has approximately 1.7 million people enrolled in its health plans; it has more than 600,000 enrollees in the Rochester region’s Blues plans. It also runs Blues plans in the Syracuse, Utica-Rome, Watertown and Finger Lakes regions and the non-profit Univera Healthcare HMO in Western New York.

The Lifetime/Excellus group’s Excellus Health Plan Inc. insurance unit is a 501(m) non-profit. The designation denotes a tax-code category covering non-profits whose revenues mostly come from sales of commercial insurance. Organizations so classified must pay taxes. Lifetime Home Care and Hospice, which contributed $68 million to the Lifetime/Excellus group’s revenues in 2008, is a 501(c)(3).

Given the Lifetime/Excellus group’s size and complexity, Excellus’ status as a taxpaying rather than a tax-exempt organization and the need for such an organization to maintain high-quality board supervision, the governing board’s compensation does not seem out of line, Leonard said.

MVP Healthcare

The non-profit MVP Healthcare is second to Excellus in the Rochester market as a health insurer with approximately 350,000 local enrollees. Based in Schenectady, MVP insures some 700,000 people in all and has $3 billion a year in premium revenue.

It offers health plans across a swath of Upstate New York from the Capital District to the Rochester region and in Vermont and New Hampshire. It is a 501(c)(4) non-profit. Organizations so classified do not generally pay taxes on income but are liable for gift taxes on contributions and for taxes on income spent on political activities.

In 2008, MVP paid 21 outside directors a total of $485,634. Individual directors’ fees ranged from $8,800 to $39,600, publicly filed documents show. In 2009, it paid the same group a total of $458,070, dropping the directors’ pay an average 6 percent. Payments in 2009 ranged from $15,186 to $36,812.

Board officers and heads of committees are paid more because of the additional work involved. The highest stipend goes to the chairman, MVP spokesman Gary Hughes said.

Not singing the blues
The 17 members of the Lifetime/Excellus group’s governing board collectively made $1.3 million last year-a 37 percent hike.
Director                     2009 pay              2008 pay              Change
John Doyle Jr.          $114,475             $71,463               60.2%
Casper Sedgwick    $76,652               $62,042                23.5%
Randall Clark $69,625  $52,748  32.0%
George Yancey Jr. $68,987  $53,710  28.4%
Hermes Ames III $68,025  $47,178  44.2%
Thomas Coughlin $64,205  $51,312  25.1%
Carol Raphael $63,975  $48,448  32.0%
Leonard Redon $63,242  $37,167  70.2%
Edward Pettinella $62,492  $43,465  43.8%
Joseph Kurnath M.D. $61,393  $31,568  94.5%
Deborah Freund $61,378  $46,651  31.6%
Natalie Brown $57,028  $35,053  62.7%
Albert Simone $56,431  $50,154  12.5%
Thomas Hobart Jr. $53,512  $36,714  45.8%
Geoffrey Davis $51,964  $41,489  25.2%
David Reh $48,025  $44,475  8.0%
D. Rob McKenzie M.D. $47,278  $42,001  12.6%
Total $1,088,687  $795,638  36.8%
Sources: Lifetime Healthcare Cos. and Excellus BlueCross Blue Shield, MVP Healthcare and IRS Form 990

Taking a step back
MVP Healthcare, which is second to Excellus in the Rochester market, in 2009 decreased its directors’ pay an average 6 percent.
Director 2009 pay 2008 pay Change
Richard D’Ascoli $36,812  39,600 -7%
Arthur Roth $28,440  29,373 -3%
Joseph Schwerman M.D.  $26,887 32,398 -17%
William Reddy $25,661  26,671 -4%
Karen Johnson $24,960  25,780 -3%
Jon Rich $23,760  25,140 -5%
Herschel Lessin $23,550  20,497 15%
Richard Gullott $23,520  24,040 -2%
Michael Schneider M.D.  $22,134  22,485 -2%
Ernest Levy M.D. $21,785  23,185 -6%
Burt Danovitz $21,215  21,823 -3%
Alan Goldberg  $20,640  21,160 -2%
Joseph De Paolis  $20,560  24,130 -15%
Anthony Costanza  $20,280  23,884 -15%
Norma Westcott  $20,280  21,160 -4%
Wilfred  Schrouder   $17,400  19,131 -9%
Gerald Van Strydonck  $17,120  23,620 -28%
Michael Copeland $16,320  18,220 -10%
Donald Bentrovato M.D.  $15,960  17,200 -7%
Wallace Altes  $15,600  8,800 77%
Gary Bonadonna  $15,186  17,337 -12%
Total $458,070  $485,634 -6%