Senior House Democrats Question Insurers About Business Practices

U.S. Rep. Henry Waxman, chairman of the House Energy and Commerce Committee, and Rep. Bart Stupak, chairman of its Oversight and Investigations Subcommittee, sent letters to insurance companies, saying the committee is "examining executive compensation and other business practices in the health insurance industry."

Waxman, D-Calif., and Stupak, D-Mich., want lists of employees who earned more than $500,000 a year between 2003 and 2008, and a detailed explanation of exactly what those employees were paid. The letter sent to the companies also asks for a list of "all conferences, retreats or other events held outside company facilities" and what was spent on them, including for transportation, lodging, food, entertainment and gifts.

It requests documentation on how compensation is decided in their companies and also calls for a table detailing, from 2005 to 2008, their "premium revenue, claims payments, sales expenses, other general or administrative expenses and profits for all of the company's health insurance products." The letter says the committee wants the information by September.

Chris Curran, a spokesman for Cigna Corp., said his company received the letter and "will respond as appropriate." He said, "some of the information requested is filed in public documents."

UnitedHealth Group confirmed it has also received the letter, but had no further details to offer yet about its intended response, according to spokesman Tyler Mason.

Leaders of the Democratic movement toward health care reform have recently criticized health insurers as their main opposition -- a charge the insurers deny, citing their own proposals for changes to the industry. Also, executive compensation -- in general -- has been an issue drawing major Capitol Hill headlines. Recently, a progressive group supporting Democratic politics, Americans United for Change, struck directly at Cigna (NYSE: CI) and the pay of its chief executive officer. They ran a television advertisement showing an image of Cigna Chief Executive Officer H. Edward Hanway, beside the phrase "$12.2 million a year." The ad criticized Hanway's compensation, saying, "Ed makes more in one day than the average worker makes all year long" (BestWire, Aug. 4, 2009).

Also, there has been a lot of attention on the pay for new head of American International Group Inc. On Aug. 17, AIG (NYSE: AIG) disclosed it will pay Robert H. Benmosche, its new president and chief executive, an annual salary of $7 million. The compensation package will include $3 million in cash and the balance in AIG common stock, according to an U.S. Securities and Exchange Commission filing (BestWire, Aug. 17, 2009). The news has drawn criticism from some Democrats who consider the pay excessive for an executive from a company rescued by the government.

Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent). Most UnitedHealth companies have current ratings of A- or A (Excellent), and most Cigna companies are rated A- (Excellent).