Blue Cross Blue Shield of Michigan revealed Friday that it paid CEO Daniel Loepp $19.2 million last year. Why so much? According to spokesman Andy Hetzel, "We are keeping health care affordable to the best of our ability here in Michigan. We think he earns the money that he makes.”
The insurer, which is a nonprofit, seems to have confused profitability for affordability. Loepp’s fat paycheck included a bonus of $16.2 million, which seems to have been a reward for the insurer’s massive $559 million profit in 2018—it’s highest in over 10 years.
That profit amounted to a tax of over $100 on every woman, child and man covered by BCBS of Michigan. The company’s profit margin on its insurance business in 2018 was over 6%, which is quite high for a health plan, let alone a nonprofit one.
When it comes to making profits, BCBS of Michigan has a history of utter ruthlessness. Under Loepp’s leadership the company previously cut secret deals with hospitals that were designed to increase health care costs. Here’s how a federal appeals court in 2016 described them:
Per the MFN-plus agreements, Blue Cross agreed to pay higher rates to each hospital so long as the hospital agreed to charge even higher rates—up to 40% higher, according to DOJ’s complaint—to other commercial health-insurers. The record in this case also reflects that, the greater the spread between Blue Cross’s rates and the minimum rates for other insurers, the higher the rates that Blue Cross was willing to pay. For example, Blue Cross would agree to pay a certain rate if a hospital agreed to charge other insurers 10% more than Blue Cross; but if the hospital agreed to charge other insurers even more—say, 20 or 30% higher rates than Blue Cross—then Blue Cross would agree to pay even higher rates. Thus, the effect of Blue Cross’s market power was not to lower its customers’ rates, as typically advertised. Instead the effect was to raise them, for Blue Cross’s customers and everyone else—while preserving or expanding Blue Cross’s market share.
More recently, BCBS made news for yet another underhanded profit maximization scheme, also while Loepp was CEO—charging hidden fees to its large employer customers. As Axios reported last month:
Hundreds of companies in the state have sued the insurer over hidden fees, which were secretly embedded in hospital and physician claims between 1994 and 2012. A 2014 federal ruling said BCBS of Michigan violated federal employment benefits law.
One more thing about that $19.3 million salary payment for keeping health care affordable: Spokesman Hetzel, who aptly calls himself on his Twitter profile “Storyteller,” told reporters that the compensation puts Loepp among the five highest paid BCBS CEOs in the country—something the scribes all dutifully reported. What he didn’t tell them is that it also makes him the single highest-paid BCBS CEO. No one has been reported making more than Loepp.
But we should all be grateful. No one is doing more to make health care affordable. Right?