The board of Blue Cross Blue Shield of Massachusetts seems to be doing some soul-searching (spurred on by AG Martha Coakley) in the wake of reports of the obscenely huge severance package obtained by former CEO Cleve L. Killingsworth, who left the non-profit last year, $8.6 million richer.
The board is reconsidering its non-profit status.
Blue Cross Blue Shield is broadly hinting that it may seek to break away from its public charity status and financial disclosure requirements, sparking warnings from Attorney General Martha Coakley that she will not tolerate any end runs to avoid accountability.
“Our classification as a charity creates understandable confusion about the community’s expectations of us — do we behave like a business or a charity? We believe it would be much healthier to have an environment where our expectations are clear to everyone — to government officials, to the community, and to us,” the Blue Cross board said in a statement yesterday.
“We’re asking the question: Is there some other form of not-for-profit?” Blue Cross CEO Andrew C. Dreyfus explained in an interview with Herald reporters and editors.
He floated the idea of changing the insurer’s classification as a public charity and announced that the Blue Cross board had abruptly suspended the pay of its 18 members in the wake of a fierce public outcry over their compensation and an $11 million payout to former CEO Cleve Killingsworth amid the company’s $149 million loss.
But Coakley cautioned Blue Cross against any attempts to skirt scrutiny of her Public Charities Division.
“They can’t take the advantages of being a not-for-profit and take the advantages of being a for-profit. That’s one thing that they can’t do,” said Coakley, who is investigating Killingsworth’s severance package and the board’s pay. “Why would we make that exception? What would be the reason? I’m not aware of other states or in Massachusetts where we have such hybrid creatures."
Public charities in Massachusetts are organizations that actually solicit, and rely upon, donations from individuals in order to sustain activities, and are gven substantial tax breaks and other benefits. Obviously, a multi-billion dollar insurance company can't call the premiums it receives donations, and has long since ceased to function as a private charity. Suspending board members' pay is a good start for the organization in answering the storm of public criticism and scrutiny over Killingsworth's severance package.
CEO Dreyfus has "ruled out converting Blue Cross to a for-profit company or a mutual insurance firm, where the members hold ownership stakes." That leaves very few options for the organization, particularly with scrutiny it is now under from the state.