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Blues CEO pay nearly $3 million

Despite a troubling year marked by harsh criticism of an ambitious plan to sell CareFirst BlueCross BlueShield, chief executive Williams L. Jews collected about $2.8 million in salary and incentive pay in 2002, according to records released yesterday by the Maryland Insurance Administration.

Jews, who also serves as CareFirst's president, received $917,791 in base pay and $1,857,715 in incentives last year, thanks to a compensation package that rewarded him for his performance in 2001, when the nonprofit company announced plans to convert to a for-profit operation.

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Jews' total 2002 compensation was almost 3 percent higher than in 2001.

Six other CareFirst executives made more than $590,000 each last year, and the company's 22 board members made an average of about $44,000 each, according to a company compensation report released by the insurance administration.

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Salaries and bonuses at the state's largest health insurer have been a central issue in a bitter dispute over CareFirst's failed attempt to sell itself for $1.3 billion to WellPoint Health Networks Inc. of California. The plan was rejected in March by Maryland's insurance commissioner, who called bonuses proposed in the deal illegal.

State legislators subsequently passed a reform that will replace CareFirst's 12 Maryland board members and create guidelines to determine executive pay.

"Now that the CareFirst board has been told under no uncertain terms that the strategy they pursued has been rejected, can this board reflect what the General Assembly, the governor and the public want from CareFirst?" said Minor Carter, a lobbyist representing Maryland Cares!, a coalition that opposed CareFirst's conversion plan.

"They have richly rewarded their executives," Carter said. "But now that the plan has been rejected, they have yet to come up with an explanation of how they will change the way they are paying people. It is their responsibility to tell us what they are going to do to change their policies. Their silence, so far, is outrageous."

CareFirst released a statement yesterday defending the payments and adding that its board has started to evaluate and develop new executive compensation guidelines that will comply with Maryland's reform law. The guidelines will be based on executive compensation at other not-for-profit Blues plans of similar size and scope.

Market comparisons

Currently, executive compensation and benefits are based on marketplace comparisons of similar companies that are nonprofit and for-profit. The present guidelines were developed by the Hay Group Inc., an independent compensation consultant, CareFirst said in the statement.

"CareFirst's compensation is performance-based for all CareFirst associates, including management," said Joseph Haskins, who chaired the compensation committee for CareFirst's board, in a statement.

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Reward tied to risk

Haskins added that the compensation for CareFirst's chief executive reflects the market for someone with "the talent and responsibilities of Mr. Jews, who faces the greatest risk and reaps the greatest reward."

The executives' salaries and bonuses do not include severance or retirement payments, according to the compensation filing.

According to this year's filing, the top six salaries and bonuses after Jews were paid to:

David Wolf, executive vice president of medical systems and corporate development, at $936,927; Gregory A. Devou, executive vice president and chief marketing officer, at $729,286; G. Mark Chaney, executive vice president and chief financial officer, at $698,858; Eric R. Baugh, senior vice president and chief medical officer, at $620,532; Leon Kaplan, executive vice president of operations, at $610,297; and John A. Picciotto, executive vice president and general counsel, at $591,059.

Altobello got $80,352

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Daniel J. Altobello, CareFirst's board chairman, was paid $80,352 last year.

Incentive bonuses are based on meeting or exceeding targets for membership growth, customer service and financial performance in 2001, CareFirst said.

That means it won't be clear how CareFirst's failed conversion plan will affect Jews and other executives' pay until 2004 and 2005, when the company files future compensation reports.


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