September 16, 2009


By Neal A. Shipman
Farmer Editor

“Health care premiums are for health care. They’re not for expensive retirement parties, they’re not for corporate jets, they’re not for risky hotel investments and they’re certainly not for a compensation structure that rewards senior management regardless of Blue Cross Blue Shield’s financial performance.”
Those were the scolding words of North Dakota Insurance Commissioner Adam Hamm as he released the findings of a 101-page audit by the insurance department’s “targeted evaluation” of Blue Cross-Blue Shield’s administrative costs from Jan. 1, 2004 to March 31, 2009.
Hamm has every right to be upset by the way that Blue Cross Blue Shield, the state’s largest health insurer, has been spending the premiums of their policyholders. And so do Blue Cross policyholders.
Six months ago, Blue Cross Blue Shield of North Dakota came under fire after spending $238,000 on an incentive trip to the Cayman Islands for some of its employees and then giving fired executive Mike Unhjem a $2.5 million severance package.
And now last week, what Hamm and the state insurance department found in their audit of the insurance company was some truly questionable administrative expenses.
Some of these expenses include:
 • Director salaries for 13 board members totaling $392,200 in 2008. For those without ready access to a calculator, that amounts to over $30,000 a year per person to attend board meetings.
• Travel expenses of more than $15 million from 2004 to 2009 with a high of $3.5 million in 2007.
• $15 million in employee bonuses regardless of company performance.
• $3.5 million for a Fargo hotel partnership investment.
• $1.2 million for incentive trips for sales employees.
• A total of $551,370 in severance packages for two former vice presidents.
And quite literally the list of highly questionable, if not excessive, expenditures by Blue Cross Shield goes on and on.
While it may not be fair to compare Blue Cross Blue Shield’s corporate attitude to those of AIG and the other big financial institutions that plunged America into the current financial mess that we are now dealing with, there are certainly some troubling similarities.
And those similarities should make the administration and board members at Blue Cross Blue Shield hide their faces in embarrassment.
At the time when Blue Cross Blue Shield came under fire for their handling of Unhjem, one would have to think that the board was praying that their other practices (such as those outlined in the insurance department’s audit) would never come to light.
 But now that long list of excessive consumption has come to the public’s attention and to the attention more importantly of the thousands of North Dakotans who have been paying their premiums.
 While Hamm couldn’t call for a complete overhaul of the company’s board of directors and management, he did instruct them to “adopt and implement stricter standards that reflect the values and expectations of the North Dakota public.”
Again, strong words. And strong words that need strong action.
If the existing board of directors isn’t up to the task of making the changes needed at Blue Cross Blue Shield then maybe it’s time for a new board that more accurately reflects the values of their policyholders to fill the seats around the board table.