Comparing CEO Compensation in Various Healthcare Industries

Joe Paduda of Managed Care Matters did an excellent job with the most recent Health Wonk Review – be sure to stop by his blog and check it out.  I thought this article from Dr. Roy Poses was especially interesting.  Writing at Health Care Renewal, Dr. Poses shines the spotlight on UnitedHealth Group’s CEO Stephen Hemsley’s oversized compensation.  Roy notes that while the increase in CEO compensation does mirror the company’s overall financial success of late, it must also be considered in light of the fact that the company has made some missteps in terms of fulfilling its stated mission to provide health care “at an affordable price” and “expand access to quality health care.”  Roy’s article cites several examples of allegedly unethical behavior, and concludes by noting that “Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.”

Comparing CEO Compensation in Healthcare - Health Insurance vs Pharmaceutical CompaniesI definitely do not disagree with Dr. Poses, and we’ve noted in the past that UnitedHealth Group has had issues with large executive compensation and backdating stock options (that was with a previous CEO, however).  But I do want to use this as an opportunity to remind our readers and clients that most health insurance companies have CEO compensation packages that are far lower.  Forbes compiled a list of the 498 highest-paid CEOs in 2012, and I scrolled through the first 150 on the list.  UnitedHealth Group is there on the first page, ranked number 8 (they’re also ranked number 31 in Fortune 500 total profits, so as Roy said, the CEO salary is at least in the same ballpark with the company’s financial performance).

But you have to click through several pages of the CEO compensation list to get to the next health insurance carrier.  Humana was the next one I found, ranked at 116.  Cigna is 124.  There are several pharmaceutical companies, device manufacturers, and healthcare product suppliers among the top 150 highest-compensated CEOs, but I only found a total of 10 companies related to healthcare in the 150.  HHS predicts that healthcare spending will reach nearly 20% of US GDP by 2017 – it’s a huge industry.  And yet 140 of the top 150 highest-paid CEOs work in other industries.

That list of the most profitable companies is also interesting in terms of how health insurance carriers stack up:  Looking at total profits, in the top 50 companies, there’s only one health insurance company (UnitedHealth Group).  There are five pharmaceutical companies, which is representative of the significantly higher profits in the pharmaceutical industry than the health insurance industry.

So although I concur that much needs to be done to weed out unethical behavior in all areas of the healthcare industry, I want to make sure that readers are not left with the impression that health insurance carriers tend to have excessive CEO compensation when compared with other industries.  In the health insurance industry, UnitedHealth Group is a bit of an outlier in terms of both overall profits and CEO compensation.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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