Byline: Price Colman Rocky Mountain News Staff Writer
Blue Cross and Blue Shield of Colorado faces a Friday deadline for revamping a controversial bonus plan that would reward top executives thousands of dollars for converting to a for-profit firm.
Jack Ehnes, Colorado's top insurance regulator, said the executive incentive plan - a copy of which was obtained by the Rocky Mountain News - conflicts with pending legislation necessary to convert the Blues from non-profit status.
He has vowed to block any conversion plan that includes such bonuses.
In a sternly worded letter to Blues chief executive David Kikumoto, Ehnes said he wants to know by Friday - before a scheduled Colorado House of Representatives hearing on the bill Monday - what the Blues board will do to resolve the conflict.
Ehnes' letter expressed shock and disappointment over the existence of the plan and requested documents related to it, including board and board compensation committee meeting minutes dating to Jan. 1, 1993.
``It was a revelation that they had been working on such a plan that clearly they should have known was unacceptable in terms of the legislation,'' Ehnes said.
Late Wednesday, in an unusual action indicating the urgency of the situation, the Blues board approved without meeting a resolution deleting all references in the incentive plan to ``capital access and conversion of cash bonuses to stock and / or options.''
``We have a hearing on the bill Monday. said Blues spokesman Carl Miller. ``Because of the urgency . . . we need to get it resolved as soon as possible.''
After reviewing the resolution with the Colorado attorney general, Ehnes said it appears to address his key concerns and he will give the Blues his response today.
In his letter to Kikumoto, Ehnes said that discovery of the bonus plan was ``disappointing,'' particularly in light of problems with compensation levels and senior executive perks uncovered during a 1992 financial examination of the Blues.
The insurance division's 1992 financial exam uncovered problems with compensation levels and management that eventually led to the ouster of then-Blues CEO Tom Levin.
While resolution of the bonus issue could have a direct bearing on the conversion legislation, the Blues face other potential obstacles in switching to a for-profit company.
New Mexico's top insurance regulator has given the Blues plan there until Friday to comply with New Mexico law on a number of issues or face civil, and possibly criminal, action.
In addition, the New Mexico Blues and their management firm, Denver-based Rocky Mountain Health Care Corp., which also manages Blues plans in Colorado and Nevada, are under twin criminal investigations by federal authorities for problems associated with the insurer's handling of a $17 million annual Medicare contract with the government.
The Blues voluntarily withdrew from that Medicare contract last year.
Ehnes has said that he's watching both the New Mexico issues and the federal investigations closely and that their outcomes could have a bearing on the Blues conversion plans.
