Hawaii health insurers could face more scrutiny over executive pay

The Honolulu Star-­Advertiser had in April sought documents that health insurers regulated by the state file annually with DCCA's insurance division detailing the pay. The insurance division has released salary information for top executives in the past.

But DCCA rejected the public records request citing state statutes that protect proprietary information that if disclosed could cause competitive harm to a business and that protect individuals from an unwarranted invasion of personal privacy.

The decision, a reversal from past practice, leaves the public with an uneven and confusing account of how much Hawaii's health insurers are paying their top officials.

Nonprofit companies, such as Kaiser Permanente and AlohaCare, a Medicaid managed-care company serving Hawaii, must file IRS Form 990s listing the compensation of their highest-­paid employees and board members, which are widely available to the public. The forms are required of organizations that are exempt from federal taxes. Compensation must be reasonable and not excessive, or the nonprofit could lose its tax-exempt status.

A separate state law passed in 2009 requires Medicaid contractors, whether they be for profit or nonprofit, to submit public reports that include an array of financial information, including the compensation of their five highest-paid Hawaii employees. These reports pertain to AlohaCare, Kaiser, Ohana Health Plan, United Healthcare and the Hawaii Medical Service Association. The Legislature cited the need for public transparency in passing the law.

DCCA's decision in April leaves Hawaii's health insurers that operate as mutual benefit societies largely shielded from public reporting requirements.

HMSA must disclose the pay of top executives because it is a Medicaid provider. But it can publicly withhold the compensation of board members if it chooses.

The state's other two health insurers that are organized as mutual benefit societies, University Health Alliance and Hawaii Management Alliance Association, however, can now keep secret the amount they are paying their top executives and board members.

House Speaker Scott Saiki said that it's something that the Legislature should take up when it reconvenes in January. He said in the past, the Legislature has felt that such disclosure was in the public interest, citing the 2009 law.

"If the public interest favored disclosure in 2009, then the Legislature should take this up in the next legislative session," he said.

Sen. Joy San Buenaventura, who chairs the Senate Committee on Health and Human Serv­ices, said she would also support a legislative push. But Buenaventura, who is an attorney, also said that DCCA's denial of the Star-Advertiser's public records request was perplexing, reflecting both a lack of transparency and inequality of treatment of the health insurance companies.

"It just seems to be really odd that a government agency is not disclosing the records," she said.

Tax breaks

HMSA, HMAA and UHA aren't required to file IRS 990 forms because they pay federal taxes. But as mutual benefit societies they are exempt from all state and local taxes, except for unemployment compensation taxes. The exemption includes the state's 4.265% tax on insurance premiums, which alone saved HMSA about $170 million in 2022.

HMSA is by far the state's largest insurer, providing coverage to 1 in 2 residents. The insurer collected about $4 billion in member premiums in 2022.

UHA and HMAA are much smaller. UHA had 57,700 members in 2022 and collected close to $338 million in premiums in 2022, according to financial filings. HMAA in 2022 had 37,849 members and collected $211 million in premiums.

UHA and HMAA didn't respond to the Star-­Advertiser's inquiries in April about their executive and board pay.

But since then, UHA President and CEO Howard Lee has told the Star-Advertiser that his total compensation in 2022 was $678,000, which included a $454,000 salary plus a bonus. He said that on average his compensation increases by about 4% a year, which is approved by UHA's board.

Lee declined to release the compensation of other top employees.

"I value transparency, while respecting our employees' privacy, so I am volunteering to share my own compensation data despite having no requirement to do so," he said by email.

He said that UHA's board members earn $650 per meeting and the company on average has eight board meetings a year. However, Lee said some board members decline the pay and ask UHA to instead donate it to a local nonprofit of the member's choice.

HMAA declined to release information on how much it pays its top executives or board members.

HMAA President Bill McCorriston, who is also a prominent Honolulu attorney, said that he planned to ask the company's board to "affirmatively address a greater disclosure" at its next meeting scheduled for Aug. 10. He said that HMAA's executives are paid "considerably less" than at HMSA since "our size and structure are far different."

He said that HMAA board members, except for one, are paid, but declined to say how much.

Gordon Ito, the state's insurance commissioner, did not respond to an interview request for this story. The Star-Advertiser had sought to discuss whether he thought the mutual benefit societies should be required to disclose executive compensation and board pay given the hefty tax breaks.

But his office, in written responses, said it would be open to legislation or statutory amendments that clearly state the financial filings, called supplemental compensation exhibits, are "open and accessible to the public."

Ito, in April, told the Star-Advertiser that his office plays a limited regulatory role when it comes to health insurers, including compensation.

He said the insurance division is "primarily responsible for the review and oversight of the financial solvency of the insurers so that they are able to meet their obligations."

The issue of executive compensation for nonprofit health insurers has long been a hot-button political issue, both nationally and locally.

In 2008, Gov. Josh Green, who at the time was a state representative and chair of the House Health Committee, called for HMSA to lose its state tax-exempt status following a report that the company's CEO had earned $1.6 million in compensation the previous year. Green called the compensation of HMSA executives excessive. However, nothing came of the controversy.

The issue of executive and board pay has once again attracted attention. In April, the Star-Advertiser reported that HMSA's top executives received big pay raises during the COVID-19 pandemic, including HMSA CEO Mark Mugiishi, whose total compensation, including salary and bonus, rose from $2.5 million in 2021 to $3 million in 2022. The company also began paying its board for the first time, with some members earning as much as $100,000.

HMSA employees told the Star-Advertiser after the story was published that the executive pay raises came as a shock. HMSA during that time had been laying off employees, largely freezing salaries and cutting benefits, including pensions, citing the challenges wrought by the pandemic.

Green did not respond to an interview request for this story or questions about whether he still held the view that HMSA should have its state tax exemption revoked.

___

(c)2023 The Honolulu Star-Advertiser

Visit The Honolulu Star-Advertiser at www.staradvertiser.com

Distributed by Tribune Content Agency, LLC.