Friday, October 31st, 2014
Mostly False
Health Care for America Now
Health insurance companies pay CEOs $24 million a year

Health Care for America Now on Tuesday, September 15th, 2009 in a television advertisement

Health care advocacy group blasts insurers for CEO pay packages

The ad from Health Care for America Now says insurance CEOs make $24 million a year and that insurers deny 1 in 5 treatments prescribed by doctors.

Supporters of health care reform have portrayed insurance company CEOs as overpaid villains. In a recent television ad, Health Care for America Now, a group supporting the Democrats' health care reform bill, takes direct aim at the CEOs.

The group's ad mockingly explains "how to get rich" by showing a "book" written "by America's health insurance companies." Chapter 2 reads, "Pay your CEO $24,000,000 a year." A news release issued by HCAN attributed the assertion to the entry for Ronald A. Williams, CEO of insurance giant Aetna, in the 2008 Forbes magazine executive compensation survey.

We checked Forbes , which compiles the total compensation from public filings of salaries and stock options, and the $24 million figure does indeed jibe with the entry the group cited. But we wondered whether it was fair to use Williams as an example of health insurance CEOs. So we looked through the magazine's full rankings for a bit more context.

One thing to note up front is that HCAN used Forbes ' 2008 survey, even though the 2009 survey is available. Oddly, if the group had used the more recent numbers, Williams' compensation would actually have been higher: In the 2009 Forbes survey, Williams' compensation was listed as $38.125 million.

That said, Williams' pay package was easily the highest in the health insurance sector, according to Forbes . Here are seven health insurance CEOs who made the 2009 Forbes list. (All lead publicly traded companies, which have more stringent disclosure requirements than private firms.)

-- 22nd place among all CEOs: Ronald A. Williams, Aetna, $38.125 million

-- 135th place: H. Edward Hanway, Cigna, $10.27 million

-- 269th place: Stephen J. Hemsley, UnitedHealth Group, $5.035 million

-- 306th place: Angela F. Braly, WellPoint, $4.07 million

-- 359th place: Robert B. Pollock, Assurant, $3.14 million

-- 387th place: Allen F. Wise, Coventry Health Care, $2.6 million

-- 399th place: Michael B. McCallister, Humana, $2.39 million

The average for the other six executives above was $3.93 million — almost one-tenth of what Williams was paid. So it's clear that HCAN has chosen the highest-paid CEO for its purposes.

We should note that executive compensation is notoriously complicated to calculate, since it often includes a mix of salary, benefits, deferred compensation and stock options. Indeed, different sources reported the same CEO pay package differently. For instance, the current listing on Yahoo! Finance has Williams' salary at $3.04 million with no stock options — a number that would have made HCAN's ad highly misleading. However, for the sake of consistency, we will stick with the Forbes methodology.

We won't venture an opinion on whether these CEOs' salaries are merited, but we did talk to one expert who provided some cross-industry context: Graef Crystal, a veteran consultant and analyst on executive compensation who is also a columnist for Bloomberg News. In a recent column inspired by congressional Democrats' denunciations of the health insurance sector, Crystal offered some calculations designed to gauge whether CEOs in the health insurance sector were overpaid or underpaid compared to executives in other sectors.

Crystal's math is complicated, but the bottom line is that when he looked at compensation for the five biggest health insurers' CEOs in 2007 and 2008, Williams' pay package was the only one of that group that in both years was bigger than the typical compensation package for CEOs throughout all the industries Crystal studied. Most of the other health insurance CEOs were paid 15 percent to 81 percent below the typical level calculated by Crystal. In other words, Williams was the one health insurance CEO who has consistently been paid on the highest end of the scale.

The ad leaves viewers with the impression that $24-million is a typical compensation for a health insurer's CEO. But in fact, it is the highest example and the average of the others is considerably lower — just under $4 million. So HCAN has certainly cherry-picked the most dramatic number. We find the claim Barely True.



Editor's note: This statement was rated Barely True when it was published. On July 27, 2011, we changed the name for the rating to Mostly False.