Executive Compensation

As health corporations shed their nonprofit status, many executives profit financially. Nonprofit executives are prohibited by law from engaging in “private inurement” – the receipt of financial benefits that are above and beyond “reasonable compensation.” But when a nonprofit health plan becomes for-profit, this law no longer applies. The following study examines the salary packages of Blue Cross and Blue Shield plans both before and after their “conversion” from nonprofit to for-profit status. Typically, after six months or a year following a conversion, regulators permit the new for-profit to increase executive pay to higher levels and grants stock options to managers and employees.

Given the potential for exorbitant private financial gain by executives, communities and regulators should work to ensure that the conversion is truly in the public interest before allowing it to go forward.

How Much is Too Much: Executive Compensation Following the Conversion of Blue Cross and Blue Shield Plans from Nonprofit to For-profit Status (PDF)