Byline: Price Colman Rocky Mountain News Staff Writer
Top executives at Blue Cross and Blue Shield of Colorado and its management arm stand to make thousands of dollars in bonuses if the company converts from a non-profit insurer to a for-profit company.
That conflicts with a clause in proposed conversion legislation - Senate Bill 100 - that prohibits officers or employees of the Colorado Blues or its management arm, Rocky Mountain Health Care Corp., from benefiting financially.
Colorado's top insurance regulator has vowed to turn down any conversion plan that allows Blues executives or employees to make money from the conversion.
``It's quite clear that the public has an underlying concern that conversions taking place in this country . . . may be for the benefit of executives conducting the transactions,'' said Jack Ehnes, Colorado Insurance commissioner. ``We won't approve any plan that rewards executives for the plan being proposed.''
Documents obtained by the Rocky Mountain News show that the incentive plan, which Blues board members reviewed late last year, encompasses a possible conversion and includes awards of stock, stock options and discounted stock options to top officials when the converted company conducts an initial public stock offering.
``This will be resolved before the week is over,'' said Carl Miller, spokesman for the Blues. ``The board will do whatever it takes to comply with Senate Bill 100 before the week is out.''
Miller said Blues management brought the conflict between the company's long-term incentive plan and SB 100 to the attention of the executive compensation committee during a February meeting. Officials then set in motion plans to change the incentive plan so that it conforms with the legislation.
The incentive plan was in place before Blues officials began formal discussions with Ehnes about legislation that would enable a conversion in late December.
Nonetheless, Ehnes said, the incentive plan runs contrary to a clause in the proposed conversion legislation that says, ``No director, officer, agent or employee of the corporation or the holding company that owns the corporation . . . shall receive any fee, commission or other valuable consideration, other than his or her usual regular salary and compensation, for in any manner aiding, promoting or assisting in the conversion.''
Ehnes questioned whether the Blues officials had the right priorities in mind when reviewing the incentive plan at a time the company was preparing legislation to enable the conversion.
``The first thing to do is not the executive compensation plan,'' he said. ``The first thing to do is make sure you have a legal environment to permit conversion.
``It seems very strange that their energy would have spent completing this and dotting every `i' on the executive compensation plan.''
The issue has also raised red flags for consumer activist groups that are closely watching the Colorado Blues conversion efforts.
``It's clear that in these kind of transactions nationwide, inflated incentive programs, including discounted stock options for executives, have in part driven decisions by top executives to go for-profit,'' said Valissa Tsoucaris, who's monitoring the legislation for the Colorado Lawyer's Committee.
``I don't know if this is what is driving the (Colorado) Blues decision to convert. But if it is, it's obviously not a motivation premised on meeting policy holders' interests and the interest of health care.''
