Vermont Department of Banking, Insurance, Securities and Health Care Administration Commissioner Paulette J. Thabault announced today that she has ordered BCBSVT to return $3 million in premium refunds to subscribers to conclude the Department’s investigation into the excessive compensation paid to former CEO, William Milnes. The Company agreed to enter into a stipulation and accept the requirement to return money to subscribers, rather than contest the matter in administrative hearings.
After Mr. Milnes retired from BCBSVT in 2008, BCBSVT reported to BISHCA that it had paid Mr. Milnes more than $7 million at the time of his retirement and over the course of the preceding year. The Department responded by initiating a formal investigation into BCBSVT’s compensation practices to determine whether the payments to Mr. Milnes were made in violation of state law. “Under our laws”, said Commissioner Thabault, “the Company is supposed to be operated solely for the benefit of subscribers and at minimum cost. When it doesn’t, we will take action.”
As part of its investigation, the Department subpoenaed records, engaged its own experts, and examined the compensation practices of other companies before concluding that Mr. Milnes had been paid substantially more than the true competitive range for the position, in part because the Company was comparing itself to much larger Blue Cross organizations. The large bonuses routinely given to Mr. Milnes by the Company Board of Directors also had the effect of increasing the value of an already generous retirement package.
“Although the Department does not set salary levels or approve retirement plans for insurance executives, the investigation showed that the compensation paid to Mr. Milnes simply was not reasonable when compared to similarly-sized managed care and health insurance companies”, said Commissioner Thabault.
The Order entered by the Commissioner acknowledged the many steps taken by the Company since Mr. Milnes’ retirement to reduce executive compensation and otherwise limit administrative costs, but nonetheless required the Company to take additional steps towards improved cost containment efforts to protect individual Vermonters and Vermont businesses from otherwise unsustainable medical trends.
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