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Time for Blue Cross to act like a non-profit

Posted on March 29, 2007March 30, 2007 by Staff

By Adam Searing
N.C. Justice Center’s Health Access Coalition

Nearly $190 million. That’s the just-released annual “profit” of “nonprofit” NC Blue Cross Blue Shield, NC’s largest health insurer. $3.1 million. That’s the latest annual compensation for Blue Cross CEO Bob Greczyn. In fact, when you add in this year’s nearly $600,000 raise, Mr. Greczyn has seen a 261 percent rise in his income at Blue Cross since the year 2000. The typical North Carolina worker, whose premiums make Mr. Greczyn’s outsize salary and profits possible, has seen a 1.7 percent drop in yearly wages over the same period of time.

NC Blue is hardly acting like a nonprofit organization anymore. Compare Mr. Greczyn’s pay with three much larger for-profit companies: Whirlpool, UPS and GlaxoSmithKline. NC Blue Cross operates only in North Carolina and employs about 4,500, mostly in Chapel Hill and Durham. Whirlpool, the global manufacturer of home appliances, had sales of $19 billion and employs 80,000 people worldwide. Whirlpool CEO Jeff Fettig made $3.2 million in 2005. UPS made $42.6 billion delivering packages in 2005 and employs 427,700 people worldwide. UPS CEO Michael Eskew made $3.1 million in 2005.

Super-profitable drug maker GlaxoSmithKline, whose worldwide operations employ over 100,000 people, paid CEO Jean-Pierre Garnier $5.4 million in 2006.

Despite appearances, NC Blue Cross is still a nonprofit organization that was created—to quote a line from a 1968 history published by the company—as a “community project whose motive was never pecuniary gain for those who promoted it.” In fact, the Duke Endowment, now the largest philanthropy in North Carolina, thought the idea of Blue Cross so worthy that it contributed the original $25,000—an enormous sum in 1935—to start the organization. Over the years, a governor championed the Blue Cross cause and state taxpayers chipped in with direct help, in addition to enormous tax breaks, to help the nonprofit acquire more members. Other important North Carolina philanthropists made huge contributions.

What would the public-spirited community leaders who created the company in the 1930s to help folks pay their hospital bills think of the organization now? Certainly the Duke Endowment wouldn’t dream of making another grant today to boost Mr. Greczyn’s salary and other executive compensation even more. Can one imagine a North Carolina governor encouraging North Carolinians to join Blue Cross so that their profits could reach even higher historical levels? And what about state taxpayers? Although the tax breaks given to NC Blue are now gone, can one imagine taxpayers wanting to contribute even more money beyond their premiums to fund an executive suite that now boasts four executive salaries that crack the million–dollar level?

Blue Cross’s response to this criticism? “We are now taxed like any other for-profit health insurer,” they say. They then argue they can’t be held to a higher nonprofit standard because “the company has changed.” Putting aside whether Mr. Greczyn’s compensation even makes sense in the for-profit world, this argument avoids a central truth about Blue Cross.

The company didn’t become the largest insurer in North Carolina by accident. It is so huge and so strong today precisely because of those years of work and contributions by the public and community leaders. Without decades of help from the public and nonprofit institutions, Blue Cross would not have a virtual monopoly on the individual insurance market and a near-monopoly in the small-business market. Blue’s market position enables the huge profits and gigantic compensation packages.

While Blue Cross remains a nonprofit, the spiraling profits and outrageous executive compensation packages cry out for legislative intervention. The North Carolina General Assembly should move to give state Commissioner of Insurance, Jim Long, authority to rein in unreasonable executive compensation and the ability to direct excess profits back to Blue Cross policyholders in the form of premium rebates. While this is no panacea for the overwhelming health care problems facing our state, it at least is a move to correct one of the most blatant examples of health care profiteering by a company whose founders would shudder in horror if they could see what their efforts have created.

Adam Searing is the project director of the N.C. Justice Center’s Health Access Coalition. He was resident of Carrboro until last year, but swears he’s moving back someday.

3 thoughts on “Time for Blue Cross to act like a non-profit”

  1. Pingback: From Fay To Z » Blog Archive » Happy Birthday, Blue Cross and Blue Shield of NC
  2. Pingback: rochesterturning.com » Blog Archive » Your premiums at work
  3. Kay Webster says:
    October 27, 2009 at 7:59 am

    After reading about the big payout to BC CEO, it turns my stomach. I have grandchildren who have not insurance coverage. Not because parents aren’t working hard, but are just trying to make a living and exist. I am on SS and struggling too. I have a BC medicare supplement and think I need to cancel. I don’t want to give the bum another hard earned penney.

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