Severance Pay For Ex-CareFirst CEO Is Halved
Nonprofit Health Insurer Had Awarded $18 Million
William L. Jews resigned in 2006 as CEO of a Blue Cross Blue Shield firm.
(Andrea Bruce Woodall - Staff)
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Tuesday, July 15, 2008
The Maryland insurance commissioner yesterday cut in half the $18 million severance package paid to former CareFirst BlueCross BlueShield chief executive William L. Jews, saying the CareFirst board failed to restrain his compensation and the company "strayed significantly from its nonprofit mission."
The 65-page order by Insurance Commissioner Ralph S. Tyler said the retirement package violated a 2003 state law that limits compensation at CareFirst to "fair and reasonable" pay. As a nonprofit health service plan exempt from taxation, CareFirst is subject to government regulation.
"A post-termination payment of $18 million is simply too much money to pay to the departing CEO of a nonprofit company," Tyler wrote in his order. "Eighteen million dollars is nearly seven times Mr. Jews' total gross compensation in 2006."
Jews is entitled to just under $9 million of the $17.97 million severance package that CareFirst's board approved prior to his 2006 departure as chief executive, Tyler ruled. About $2.3 million in salary and other benefits that Jews has received since his departure will be deducted from the $9 million.
"A payment of nearly $9 million, while 50 percent less than that which the board proposed to pay, is no hardship," Tyler wrote.
Jews has 30 days to decide if he wants to appeal the order through Maryland Circuit Court, according to the Insurance Commissioner's Office. His lawyer, Andrew Graham, did not return telephone messages to his office seeking comment.
CareFirst issued a statement acknowledging only that it had received the decision.
"We are reviewing the order to determine what if any other action we may take regarding the matter," the statement said. The company said there would be no further comment from its executives or board of directors.
The Maryland General Assembly passed its law regulating the pay of CareFirst's chief executive after Jews unsuccessfully tried to privatize the nonprofit firm in 2003, a move that would have produced a handsome payday for top executives.
"I think it's positive," said Maryland Senate President Thomas V. Mike Miller Jr. (D-Calvert). "He was very close to many of the board members when he was released, and I think that contributed to an overly generous retirement package for himself. The board members themselves were treated very favorably, and I think they responded to him in kind."
CareFirst, which operates under the Blue Cross Blue Shield umbrella, covers almost 3 million individuals and groups in Maryland, the District and Northern Virginia.
Jews took the helm of the Maryland plan in 1993 when it was struggling financially and reeling from a Senate investigation in which it was criticized for spending on indulgences such as a Baltimore Orioles skybox.
