Redirect the outrage
The arguments against paying directors at the state’s leading health insurers are misguided and dead wrong. The problem with those boards has nothing to do with compensation. It’s all about composition.
Our biggest health insurers aren’t really public charities, no matter what the law or Martha Coakley say. They’re big insurance companies and should act that way. People love to hate insurance companies, but those businesses will be an important part of the puzzle if we ever mean to solve — or at least slow down — the real problem of soaring health care costs. More on that later.
When it comes to boards, insurance companies should be recruiting a smaller number of people with specialized skills and backgrounds to lead the managers in charge of big, complex businesses. That means throwing over many of the people who currently sit on those boards, but don’t come close to meeting such a standard.
It also means paying for the best available talent and expertise that creates real value. Why? Because that’s what it will take.
People — very talented people — stand in line to give their money away to hospitals and sit on their boards for free. Take a walk around Beth Israel and it will soon become obvious that nearly every wing, department, and even many of the elevators are named after donors. Who doesn’t want to be associated with cures and healing sick people?
Needless to say, insurance companies that are legally considered public charities in Massachusetts fit a different profile. No one ever wrote a check so their family’s name could grace the actuary department at Blue Cross Blue Shield of Massachusetts. It’s a good thing health insurers don’t take donations because no one is offering. Few would volunteer to serve on the boards of those companies and anyone who did would not stay long. Everyone knows why: It’s a business.
It’s hard to generalize about the directors who oversee our big nonprofit health insurers now. Some boards are bloated; others are not. The quality of the people varies, too.
But it’s really the directors of Blue Cross who find themselves in the crosshairs, ironically because they had the collective spine to push out former chief executive Cleve Killingsworth while the business was losing big money. Now those directors are answering for the $11 million compensation package they awarded Killingsworth in the first place, which stands out as an offensively high price for failure.
So what about them? Those directors are not wildly overpaid based on the size of the company they oversee. But the Blue Cross board is too big, and too many people were invited onto it for the wrong reasons. Cut that board in half — eliminating some of the college presidents, labor leaders (two board seats are reserved for them by law), and others with powerful connections but marginal qualifications — and Blue Cross would be better off for it.
I ran down the list of 18 Blue Cross directors looking for people with ideal backgrounds to help a big insurance company and came up with seven names. I may have been a little generous.
Money is a hot-button health care issue for obvious reasons. Stories about hefty salaries and compensation at insurance companies will naturally raise your blood pressure in a time of higher premiums, deductibles, and co-pays.
The climbing cost of coverage alone has hurt the public’s opinion of insurers. Earlier this week, I wrote about a poll conducted for an association of local health insurance plans. The results, never intended for public consumption, showed the number of people with a low opinion of health insurers had soared from 47 percent to 64 percent since 2007.
Insurance companies are in a position to make more when we pay more, but they aren’t a leading cause of the higher health costs. Hospitals and other providers that charge more — along with all of us who insist on access to expensive facilities and tend to use more services — are most responsible.
Managing those costs and expectations is the key to getting our hands around health care costs. Insurance companies can, and should be, part of the answer.
One way insurers can do better: Improve their boards by finding the best directors and paying them.
Steven Syre is a Globe columnist. He can be reached at email@example.com.