Quirks in Public Reporting of Executive Pay at Health Insurance Companies
For patients who suffer injuries as a result of medical mistakes and medical errors, as well as for consumers who simply need to rely on health insurance for their medical needs, the lack of transparency in the healthcare industry can be extremely frustrating and problematic. According to a recent article in The Inquirer, there are state laws in place that require health insurance executives to disclose information about their pay, so that the finances of these companies can be monitored. Yet,“flexible reporting rules make it hard to compare pay practices at the 20 companies that filed the disclosures in Pennsylvania and New Jersey.”
In other words, while pay reporting rules are designed to help ensure that an insurance company is solvent and has the ability to pay consumer claims, there are “quirks” in the system, according to the article. What should consumers know?
How Disclosures Regarding Executive Total Pay Rates Reflect Upon Lack of Transparency
One of the biggest quirks with the reporting requirements, according to the article, is that the rules from the National Association of Insurance Commissioners do not require insurers to disclose the total pay for executives. Instead, the rules “let the firm choose whether to make public executives’ total pay” public. While some insurers do provide information about total executive pay, many companies are only disclosing information about pay or compensation that comes from certain subsidiaries, which in turn makes it difficult to discern what an executive’s total pay might be.
Why does this matter? Or, to put it another way, why do consumers need to have information about what kind of compensation health insurance executives are getting each year? Many consumer rights advocates argue this lack of transparency is connected directly to the lack of information that consumers have about the costs of healthcare—which tend to be very expensive—in our country. According to Carmen Balber, the executive director of Consumer Watchdog, this is yet another example of opacity in health care spending that is leading to increased costs. A report from NPR also cited the ways in which executive pay is astronomical and ends up costing consumers who often have difficulty paying for health care and medically necessary prescription drugs.
As Balber went on to clarify, not only is this lack of transparency regarding executive pay increasing consumer health care costs, but it also makes it difficult, if not impossible, for consumers to know the actual costs of their care: No consumer is able to discover the cost of their hospital procedure until they go to the hospital and receive the bill. No one truly knows what prescription drugs actually cost because the pharmacy benefit managers make those negotiations secret.
How Disclosure Rules Fail to Provide Clear Information
What is it about the current rules that make it so difficult to get complete information and to chip away at the lack of transparency in the healthcare industry? There are a number of different ways that the flexible rules’ “quirks” make it difficult to have clear information, including some of the following:
- Firms that are not publicly traded do not have to provide the same depth of information;
- Firms being able to choose whether to disclose the total pay of executives (also known as “allocated pay disclosures”);
- Discrepancies between state filings and public tax returns (when public tax returns are available); and
- Some insurers include the overall CEO in filings while others do not, making it difficult to compare the filings.
Contact a Philadelphia Injury Lawyer
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