Health Insurance Exec Pay Outpaces Revenue Growth, Study Finds

Total direct compensation for top health insurance executives increased faster than their companies’ revenue growth between 2019 and 2020. Compensation rose between 8% and 14% year-over-year from 2019 to 2020. This was higher than the 3% increase in total revenue for these companies during that same period.

This was among the key findings of BDO’s Health Insurance Executive Insights Report.

The report found salaries for health insurance CEOs and most other top executives are increasing faster than the typical merit increase, which hovers around 3%.

Variable pay for health insurance executives continues to be prominent in terms of usage and target incentive opportunity. BDO said their survey results showed that all but one company reported having an annual incentive plan; and all but two companies reported having a long-term incentive plan.

In addition to cash compensation, executives may be eligible for supplemental executive retirement plans or change of control agreements, the report said. SERPs provide benefits above and beyond those covered in other retirement plans. COC agreements may provide a severance, bonus payments or accelerated vesting of equity awards. They are designed to incentivize executives to remain with the company upon a change in control or acquisition by another company.

These plans are very common, BDO said, offered by 67% of health insurance companies. They serve as important executive retention devices. However, upon a triggering event (nearly two-thirds of surveyed companies require a double trigger), the size of the payouts can be newsworthy. BDO advised boards, management and other stakeholders to be aware of the size of these potential payouts and ensure that the amounts are defensible.