Blue Cross/Blue Shield of
Michigan Top 10 Executives Made Nearly $6 Million
MIRS, May 5, 2003
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documents obtained by MIRS, the compensation level of the 10
highest paid Blue Cross/Blue Shield of Michigan (BCBSM) officers
totaled nearly $6 million ($5.947 million) for 2002, while its
43-member board pulled in a combined $1.2 million.
Topping the list was BCBSM President and CEO Richard WHITMER.
His compensation level was $1.547 million. Whitmer's salary was
$745,000. His bonus equaled $758,097 and all other compensation
tallied an additional $43,125.
Whitmer's overall compensation for 2002 was up nearly $200,000
from the $1.350 million he was paid in 2001. His 2002 level of
compensation had increased by more than 50 percent over the
$902,338 level he received in 2000.
After Whitmer, the highest-paid BCBSM officer was Les VIEGAS,
senior vice president of the auto national services division,
who made $586,398. The BCBSM's board averaged $28,000, but their
salary levels were all over the map. The highest-paid board
salary was paid to Gregory SUDDERTH, the president of
Labor-Management Service, Inc. ($79,805) while Peter SECCHIA,
chairman of Universal Forest Products, only received $42 for his
service in 2002.
The other officers and their 2002 compensation were as follows:
- J. `Paul' AUSTIN, Senior Vice President for Michigan Sales and
- George FRANCIS III, Senior Vice President for Human Resources,
- Steven HESS, Senior Vice President, General Counsel, $485,805.
- Ray KHAN, Senior Vice President, Information Officer,
- Marianne UDOW, Senior Vice President, Corporation Strategic
(MC) Administration, 463,127.
- James EPOLITO, Senior Vice President, President and CEO of the
Accident Fund, $461,392.
- Mark BARTLETT, Senior Vice President and CFO, $448,078.
- Richard COLE, Senior Vice President for Corporate
The 10 top 2002 compensation levels represent an increase of
roughly $2.2 million (nearly 60 percent) over the 2000 levels.
The information could add rhetorical fuel as the Legislature
ponders small group market reform legislation and measures that
could force the Blues to make more disclosures to the public.
According to Cole, Whitmer's compensation level is actually
lower than that of most executives who head corporations of
similar size and complexity.
“A lot of people mistakenly believe we're like the Salvation
Army or Red Cross,” Cole said. “But we have to offer salaries
that would attract someone who is capable of managing a $12
But Cole said the Blue Cross Board, while having to offer
competitive executive compensation, still can't offer
compensation at levels as high as for-profit entities can afford
“We don't have stock options to offer to provide the level of
compensation that executives of other large corporations would
receive,” Cole said. “So our benefit levels don't approach the
levels of other, similar sized, corporations.”
Cole's statement is consistent with an article published in The
Detroit News Sunday, which listed the 50 highest paid executives
in Michigan. Whitmer's $1.5 million was not enough to qualify
him for that “Michigan's Fortunate 50” list.
According to Cole, BCBSM ranks 156th on the Fortune 500 list of
largest corporations. Cole said that if Whitmer were in a
similar position with another comparable for-profit corporation
he'd be building up much greater wealth and working toward
“He's making about one-fifth of the compensation he'd be making
at comparable insurance companies,” Cole said. “I think I read
recently that about 250 insurance executives make more than $1
Cole said, however, that BCBSM executives don't tend to be
motivated by the same factors that motivates other for-profit
“We have to compete for people [executives] from the same pools
of prospects as other companies, but generally we can't offer
the same long term growth [in terms of wealth and position in
the firm] as other corporations can,” Cole said. “And remember,
you're looking at a list of the top 10 employees of about 8,500
MIRS asked Cole about the jump in compensation levels that the
top 10 BCBSM employees experienced over the past two years.
“As you can see that was mostly an increase in bonuses,” Cole
said. “That came about because of accomplishing goals that had
been set. For instance, in 2000 someone may have reached only 30
percent of the goal, so their bonus would have reflected that.
But in 2002, more people may have accomplished 60 or 70 percent
of that goal. In other words, the incentive didn't change, more
people got closer to achieving it.”
In addition to the compensation figures, the information MIRS
obtained showed that in 2002 BCBSM spent $9,674,128 on marketing
and advertising. Some observers maintain that figure seems low,
particularly compared to the Michigan State Lottery, which
currently has a $17.6 million recommended advertising budget.
However, Cole said the $9 million figure is actually bloated,
and BCBSM media buys for 2002 were more in the neighborhood of
$5 million. Cole also said he believes his own compensation was
probably rolled into the overall advertising figure.
In addition, Cole said that 2002 was an unusually active year
for BCBSM in terms of advertising.
“We had the rather unsubtle attempt by the state to for-profitize
us,” Cole said. “We also spent $1 million on generic drug
advertising that saved us up to $30 million overall.”
Sen. Tom GEORGE (R-Texas Twp.), who last week introduced
legislation on restructuring BCBSM, said he wasn't interested in
commenting on the compensation levels, but would like to see
more detailed information turned over involving costs such as
One bill from George's package is SB 457, which would require
biennial reporting by Blue Cross/Blue Shield on outside
contracts, advertising, and certain administrative expenses.
According to George, he wants to see more specific BCBSM
information turned over to the Legislature.
“I'm interested in a little bit more of break down on the
advertising,” George said. “For instance, during my campaign,
there was a full-page newspaper ad that consisted of Richard
Whitmer attacking me on my Blue Cross legislation. As a
nonprofit, I'd like to see how that was helping them meet their
mission statement. It seemed to me to be a little bit
George said he'd also like to see the Legislature receive more
of a break down on how BCBSM interacts with its subsidiaries.
“I'd like to see more disclosure on things like administrative
expenses,” George said. “We're told that administrative expenses
for their (BCBSM's) products are very low. But I don't think
they've sufficiently answered the questions on that. I'd like to
know more about what the full story is on situations like MASA
(Michigan Association of School Administrators), which
administers the insurance, as well. I'd also like to know more
about their relationship with PPOM. I think we need more
disclosure to shed some light on how those types of situations
George M. CARR, of the Health Insurance Association of America,
a group opposing the health insurance rate band legislation that
BCBSM is currently supporting in the Legislature, said that
Whitmer's salary level is justified.
“Blue Cross of Michigan had a great year,” Carr said. “They made
$50 million underwriting in the small group market. They had a
strong performance in their stocks and bonds, in what was a
dismal year overall for the stock market. They also made over
$200 million on the insurance side alone. It was a strong
performance and, when a company has a strong performance like
that, the CEO usually benefits.”
Rep. Fulton SHEEN (R-Plainwell), a member of the House Health
Policy Committee said Whitmer's compensation should raise some
issues about the rate band legislation BCBSM is supporting in
“That seems to be an awful lot of money for an executive to make
who is running a nonprofit tax-exempt, state sponsored health
insurance group,” Sheen said. “But it is consistent with what
I've learned about [BCBSM]. Last year Blue Cross made a $289
million profit. So why on Earth are we doing small market health
Liz BOYD, spokesperson for Gov. Jennifer GRANHOLM, said the
Governor really has no particular opinion on Whitmer's
compensation level at this time.
“We don't set his compensation,” Boyd said.