Leslie and Jinghong discuss the terms of health insurance startups CEOs’ compensation packages. They explain why the reported CEO total compensation numbers are deceiving.
Access the full findings from AIS’ Healthcare Executive Compensation Survey here.
Read on for Leslie’s and Jinghong’s insights.
Health Insurance Startup CEOs’ Sky-High Compensation Figures Are Deceiving
By Leslie Small, Managing Editor, and Jinghong Chen, Reporter, Health Plan Weekly, published by AIS Health, the journalism division of Managed Markets Insight & Technology, LLC. (MMIT)
That’s according to Health Plan Weekly, published by AIS Health, the journalism division of Managed Markets Insight & Technology, LLC. (MMIT). The report, published December 9, is based on AIS Health’s annual collection of compensation data from state insurance departments and the Securities and Exchange Commission for the country’s largest health insurance companies by commercial risk enrollment as well as four startup insurers that went public in 2021: Alignment Healthcare, Inc., Bright Health Group, Inc., Clover Health Investments Corp. and Oscar Health, Inc.
“They’re never going to realize, in one year, that much compensation,” says Ari Gottlieb, a principal at A2 Strategy Group who has been closely tracking the performance of the four startup insurers.
Gottlieb tells AIS Health that the stock awards that are largely driving the startups’ eye-popping total compensation figures—such as Clover CEO Vivek Garipalli’s $390 million or Bright Health CEO Mike Mikan’s $181 million—are based in part on the firms’ initial public offering (IPO) stock valuations, which were many times higher than what their shares are now worth. Clover’s stock, for example, opened at $15.30 per share when the firm went public in January 2021 and was valued at about $1.30 as of December 1, 2022, and Oscar’s stock value dropped from $39 at the time of its IPO in March 2021 to about $2.90 as of December 1, 2022.
BLUES CEO BEATS OUT BIG PUBLIC FIRMS
Meanwhile, for the first time since AIS Health began tracking executive compensation in 2018, the CEO of a non-publicly traded Blue Cross Blue Shield affiliate out-earned all of the major public companies’ top executives.
Patrick Geraghty, the CEO of Florida Blue and its parent company, GuideWell Mutual Holding Corp., earned $24.6 million in total compensation in 2021, representing an 11.5% year-over-year increase.
Most of Geraghty’s total compensation—$18.5 million—comes from “other compensation,” which is how firms in their regulatory filings categorize everything that is not part of a CEO’s salary, bonus, stock awards, option awards or non-equity incentive plan compensation. A Florida Blue spokesperson tells AIS Health that within the $18.5 million “other compensation” figure, $8.5 million comes from a one-time, non-recurring retention bonus that Geraghty had earned over the past five years and was paid out in 2021.
In addition to being the parent company of Florida Blue, GuideWell operates a host of businesses around the country, including non-health-insurance assets. And in February 2022, GuideWell closed its acquisition of Puerto Rico’s largest insurer, Triple-S Management Corp., in a deal worth $900 million.
Among the health insurers included in AIS Health’s executive compensation table, the biggest year-over-year compensation increases came from Capital Blue Cross (312%), CareSource (234%) and Health Care Service Corp. (101%). Two out of those three organizations had chief executives who were new to their roles, as HCSC’s Maurice Smith became CEO in June 2020, and Capital Blue Cross’ Todd Shamash took the helm in April 2020.
In 2020, Blues affiliates also saw the biggest yearly increases in executive compensation, with Blue Cross Blue Shield of Minnesota’s Craig Samitt receiving a 109% raise and Independence Blue Cross’ now-retired Daniel Hilferty getting a 73% total compensation bump.
Access the full findings from AIS’ Healthcare Executive Compensation Survey here.
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