Blue Cross CEO gets hefty raise

The nonprofit company increases executives' pay as premiums rise for medical insurance

Blue Cross and Blue Shield of North Carolina, which has come under fire for big profits and premium increases, paid its top executive $3.1 million last year, a 22 percent raise.

Several senior executives also received double-digit raises. Three earned more than $1 million in annual compensation for the first time, according to the company's annual report, which The News & Observer obtained from state regulators Friday.

The increases were driven by bonuses that chief executive Robert J. Greczyn Jr. and other executives earned for boosting Blue Cross' financial performance, said spokesman Mark Stinneford.

The health insurer is the state's largest, covering 3.4 million North Carolinians.

The nonprofit company on Friday reported net income of nearly $190 million last year, up 13 percent from 2005. Total revenue rose 15 percent to $4.4 billion.

Adam Searing, director of the N.C. Health Access Coalition and a frequent Blue Cross critic, pointed out that Blue Cross became what it is today by receiving tax breaks for decades.

"They are rolling in money, and the legislature sits by and lets it happen," Searing said. "I don't want to hear another person complain about increasing health-care costs if they're not willing to rein in outrageous profits and executive compensation at Blue Cross."

Stinneford said Blue Cross increased its executives' compensation -- salary, bonus and other pay -- after a comparison that showed the company's pay "lagged significantly." It is now comparable to that received by executives at 25 other health insurers of similar size.

According to the filing with the Department of Insurance, Greczyn received a $2.2 million bonus on top of a base salary of $862,151 and other compensation of $32,136.

Greczyn oversees a company with 4,300 employees, mostly in Chapel Hill. By comparison, drug maker GlaxoSmithKline, which has about 100,000 employees worldwide, reported Friday that it paid CEO Jean-Pierre Garnier $5.4 million last year.

Executive compensation has become a lightning rod for criticism in recent years, especially as raises slowed for lower-level employees. Regulators now require publicly traded companies to disclose more details on pay. And some investors are pushing to rein in executive pay.

Nonprofit organizations have also come under scrutiny. Last year, Forbes magazine reported that pay increases for nonprofit executives had outpaced, on a percentage basis, that received by CEOs of the 500 biggest American companies.

Blue Cross' income and executive compensation have drawn criticism before from consumer advocates, some lawmakers and regulators. Hospitals, doctors and other health-care providers also have complained the insurer is squeezing their payments even as it makes more money.

Compared with a year ago, Blue Cross members pay about 6 percent higher premiums, on average.

Stinneford said that Blue Cross does not plan higher rate increases this year but that rising medical costs could change that. According to health insurance brokers, medical and prescription drug costs are expected to increase about 7 percent to 9 percent nationwide.

Searing urged changes in the state law that would trigger premium rebates and give the Department of Insurance more control over Blue Cross' executive pay. The Department of Insurance previously pushed for legislation that would have required Blue Cross to give money back to members if its income was above a certain amount.

Blue Cross scrapped plans to convert to a for-profit company in 2003, after regulators, lawmakers and advocates opposed the move.

But Blue Cross operates much like a for-profit company nonetheless, said Chrissy Pearson, spokeswoman of the Department of Insurance. Regulators have some oversight over rate increases, "but we don't tell them how much they can pay themselves," she said.

Of every $1 members paid in premiums, less than one penny pays for the compensation of Blue Cross' top nine executives, Stinneford said. Medical care ate 82 cents of every $1 in premiums last year.

"If these executives didn't get paid at all, it wouldn't be noticeable in premiums," he said.