It's Good to Be an HMO King

Physician's Money Digest, August31 2003, Volume 10, Issue 16

It seems that just about every physician has somethingto say about the financial state of health carein our country. Now, there's 1 more thing to chew on.According to a recent report from Families USA, anonprofit organization for health care consumers,the average annual compensation package for thehighest-paid executives in 11 publicly-traded, privatehealth insurance companies was $15 million.


  1. Oxford Health Plans, Norman C. Payson, formerchairman and CEO, $76 million
  2. WellPoint, Leonard D. Schaeffer, chairman andCEO, $21.8 million
  3. Coventry, Allen F. Wise, president and CEO,$21.7 million
  4. UnitedHealth, R. Channing Wheeler, CEO,Uniprise, $9.6 million
  5. Aetna, John W. Rowe, MD, chairman and CEO,$8.9 million

Meanwhile, according to the Medical GroupManagement Association 2002 Physician Compensationand Production Survey, US primary care physiciansrealized a paltry 1.2% annual compensationincrease last year to $149,909. That minisculeincrease, when viewed over the past 5 years, indicatesan even more alarming trend—compensation for primarycare doctors rose only 1.9% per year.

Ron Pollack, executive director of Families USA,said the report is "proof once again [of] how costlythese private health insurance plans are because oftheir profligate spending and extravagant compensationpackages paid to executives."


The report went on to examine the largest valuesof unexercised stock options for executives in each ofthe 11 companies. The average worth of the largestunexercised stock options at the 11 companies in2002 was $67.7 million. The largest were as follows:

  1. UnitedHealth, William W. McGuire, MD, chairmanand CEO, $530 million
  2. WellPoint, Leonard D. Schaeffer, chairman andCEO, $93.1 million
  3. Oxford Health Plans, Norman C. Payson, formerchairman and CEO, $25.6 million
  4. Aetna, John W. Rowe, MD, chairman and CEO,$24.1 million
  5. Health Net, Jay M. Gellert, president and CEO,$23.5 million

Other companies included in the report were:Anthem, Inc; CIGNA Corp; Humana, Inc; PacificareHealth Systems, Inc; and Sierra Health Services, Inc. All11 currently serve Medicare beneficiaries throughMedicare+Choice.

Beyond executive compensation numbers, anotherreport released by Hewitt Health Resource, a firm thatcaptures HMO rate information for nearly 140 largeemployers, shows that initial HMO premium rates willaverage an increase of nearly 18% for 2004. While thefigure continues a trend of double-digit increases, it'sless than the 21% rise recorded last year. After planchanges, negotiations, and terminations, the averageHMO premium increased by 17% in 2003. For 2004,Hewitt experts project the final number may be in thelow to mid-teens for large organizations.

"Continued increases at these levels remainunaffordable for the majority of employers," saysKen Sperling, east market leader for Hewitt'sHealth Management Practice. "Companies will continueto make aggressive plan design and employeecontribution changes for the future." Physicianswill likely see the effects in their own offices. Forexample, the number of companies with a $15office copay increased from 24% in 2002 to 43% in2003. At the same time, $10 office copays droppedfrom 58% in 2002 to 39% in 2003. A $15 copay forspecialty care office visits also rose in use—from25% in 2002 to 40% today—while a $20 copay isnow implemented by 12% of companies.