Bismarck Tribune (September 13, 2009)
Not the best of times, but not the worst yet either
These aren’t the best of times … these aren’t the worst of times. But they are difficult times, even in North Dakota, a state that is better off than most (if not all) others.
The days of our lives in America are punctuated with companies freezing wages and businesses doing away with bonus or incentive programs. Employees are being laid off, and other workers have seen salary cuts. Some have been required to take unpaid leave, and other benefits, such as 401(k) matches, have been dropped. Those that leave employment voluntarily are often not replaced, and the duties are sucked up by the survivors.
All of the country’s angst has been deemed necessary for businesses to stay afloat in the face of a recession — or at least remain at the same level of profit of which some have become accustomed, especially those publicly traded.
It has been a departure, some say welcome, from business as usual. Expenses, and costs once thought to be necessary, have been reconsidered, reclassified, eliminated or significantly reduced. The nation has had months of belt tightening to constrict waste, and Bismarck-Mandan recently faced bad news with the announcement that Bobcat would be locking its doors.
But who would have guessed anything really serious was wrong here at home in North Dakota? For instance, Blue Cross Blue Shield has been spending money like the alleged drunken sailor on leave. Its out-of-control escalating and lavish spending hasn’t been representative of a charitable and benevolent not-for-profit corporation.
I guess it shouldn’t surprise us as some signs have been uncovered in the recent past, but BCBS has now been exposed as grossly obese in its ugly hidden underbelly. It is bloated and stretched beyond normal comprehension, a victim of a culture of entitlement thrown into the face of our hard times.
Those are harsh words, but closer to the truth than a politically correct response after a target financial examination reported the BCBS management practices “conflict … with the purposes of a charitable and benevolent corporation.”
Yes, they do, but this is not a hand-slapping situation.
A letter to the company from Insurance Commissioner Adam Hamm charged the insurance company with excessive expenses and instructed them to “adopt and implement stricter standards … that reflect the values and expectations of the North Dakota public.”
Hamm, I suppose, had to be somewhat restrained. But you and I should be appalled at the report’s findings and BCBS should be embarrassed, apologetic and serious about fixing what went wrong, including replacement of personnel and board members, as needed. There should be no excuses. No defensive posturing. No crazy justifications.
The devil, whatever devil and wherever he lives, didn’t make them do it. They did it to themselves, leading us to question if they believed they were legends in their own mind, or a monopoly minting its own funny money.
While the BCBS patient can be saved, scarring and stretch marks will be a reminder of the privilege and entitlement mentality of the out-of-control spending.
Consider some interesting information in the report:
* Over the past 63 months, BCBS expenses have been more than $1.1 billion. Through 2008, it translates to about $200 million a year.
* Thirteen directors were paid a total of $392,200 in 2008, an average of $30,000-plus.
* More than $15 million has been spent on travel in those 63 months, with a high of $3.5 million in 2007.
* More than $400,000 was spent on charter aircraft.
* Almost $475 million has been spent during the same period on executive salaries (this does not include bonuses). Average pay for managers ranged from $85,056 to $209,353. Average pay for executives ranged from $164,941 to $1,078,560.
* The bonus or incentive program cost almost $44 million over the period reviewed, with
$12.2 million awarded in 2008.
* The president and CEO’s severance package totaled $2.5 million. That and other severance packages prompted this review statement: “Executives are paid severance packages even when BCBS is under no obligation to make such payments, including when an executive resigns to accept other employment.”
* Incentive trips to Cancun; Palm Desert, Calif.; Naples, Fla.; Puerto Vallarta; Marco Island, Fla.; and Grand Cayman Island totaled more than $1.2 million. Each trip averaged 73 people.
* BCBS has invested $3.5 million in a hotel project in violation of the North Dakota Century Code, with significant risk exposure and little involvement in oversight and governance of the project.
As politicans and officials continue to try to reach agreements on some form of health care reform, something that seems more and more difficult, insurance reform can’t be separated as a non issue.
Once again, it is a matter of following the money.