Fallon board eliminates own pay
Decision follows Blue Cross move
Fallon Community Health Plan yesterday became the second nonprofit Massachusetts health insurer to stop five-figure payments to directors for their part-time service.
Board members at the Worcester insurer voted to suspend their fees, effective immediately, following a similar decision on March 8 by Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer. They did not specify how long the suspensions would last.
The decision followed an outcry earlier this month over annual payments made to Blue Cross directors and an $11 million payout given to the company’s former chief executive, Cleve L. Killingsworth, at a time when the price of health care has become a prominent issue in the state.
Fallon’s move is likely to step up the pressure on two larger nonprofit rivals, Harvard Pilgrim Health Care and Tufts Health Plan, to halt their own directors’ compensation. Both have said their boards will consider the matter later this month. Attorney General Martha Coakley has called on the insurers, which are classified under Massachusetts law as nonprofit public charities, to end the practice of paying directors.
“We believe this is a positive first step by Fallon and we are encouraged by their decision today to suspend director compensation,’’ Coakley said in a statement yesterday. “We hope the remaining two health insurers who pay their directors will take similar action.’’
The boards of other nonpublic charities in the state, such as hospitals and museums, don’t compensate directors. Unlike those organizations, the insurance carriers don’t accept charitable donations, but they do compete with for-profit rivals that have well-paid board members.
Compensation for Fallon’s 10 board members ranged from $13,900 to $24,350 in 2010, according to a document it filed March 1 with the state Division of Insurance. By contrast, the 17 Blue Cross directors were drawing payments that ranged from $56,200 to $84,463. Blue Cross last week said it is planning to start a “public conversation’’ about whether it should continue to be classified as a nonprofit charity.
In a statement yesterday, Fallon said its board pay was “the most modest among Massachusetts-based insurance carriers.’’ It said the fees helped attract talented directors who have worked with executives on innovative products such as global payment structures that give medical care providers incentives to reduce costs and improve outcomes.
“At the same time, we understand the public and political objection to even the modest board compensation at a time of economic recession and focus on health care costs,’’ Fallon said.
Fallon had about 213,000 members as of the end of last year, compared with nearly 3 million for Blue Cross.
Robert Weisman can be reached at email@example.com.