Attorney General Martha Coakley, saying the state's large nonprofit health insurers are "unjustified" in offering compensation to their board members, has announced plans to file legislation that would allow her office to veto compensation of nonprofit board members that she deems excessive.
"The vast majority of board members at charities volunteer their service, and for good reason," Coakley said in a prepared statement. "Compensation of board members creates unavoidable conflicts of interest and diverts resources otherwise focused on achieving the mission of the charity.
"These organizations enjoy significant tax and other benefits due to their charitable status," she added, "and we asked them to justify why they should be treated differently from other charitable boards. We found their explanations to be unjustified."
Coakley's comments came after a review of compensation practices of four major Massachusetts health insurers: Blue Cross Blue Shield, Fallon Community Health Plan, Harvard Pilgrim Health Care and Tufts Health Plan.
All are designated as nonprofits and receive breaks on property taxes and certain sales taxes.
Coakley's investigation, launched last month after Blue Cross revealed it had provided its former CEO, Cleve Killingsworth, with an $11 million compensation package on his way out the door, and that its board members had received tens of thousands of dollars in stipends.
According to public filings, BCBS directors received compensation last year ranging from $56,200 to more than $84,000, with payouts delivered to Greater Boston Chamber of Commerce President Paul Guzzi, Mass. AFL-CIO President Robert Haynes, and Bentley College President Gloria Larson.
During Coakley's investigation, Blue Cross and Fallon suspended board pay, but Harvard Pilgrim and Tufts chose to continue paying their boards, according to Coakley's office. Coakley found that the insurers defended their practice by contending that health insurers are more complex than most nonprofits and require skilled directors, that directors devoted a substantial time commitment to their work, and that they must offer stipends to compete with health insurers around the country, many of which are for-profit.
"The Attorney General's Office found these and other explanations to be unsubstantiated," Coakley's office said in a prepared statement.
The fray comes amid a turbulent time across the state health-care landscape.
On Cape Ann and the North Shore, Northeast Health System, the parent company of Gloucester's Addison Gilbert Hospital and Beverly Hospital, is openly exploring a merger or partnership with four other service providers — Lahey Clinic, Beth Israel Deaconness, Steward Health System, which includes the Caritas hospitals, and Vanguard Health Systems.
Eric Linzer, a spokesman for the Massachusetts Association of Health Plans pointed to a report Coakley issued last year pointing to the market leverage of health care providers as a main driver of health care cost increases.
"The most important thing that can be done to control health care costs is to address the market power of certain providers and the prices they charges, as was highlighted in last year's report by the attorney general on health care cost trends," Linzer said. "We look forward to seeing the details and specifics of her bill, and we look forward to working with her on the issue."
Coakley intends to ask Massachusetts nonprofits that compensate directors to file an annual report detailing the rationale for continuing the practice, and her office will issue a report based on those filings.
The bill would bar nonprofits from paying directors without approval from the attorney general's Public Charities Division, and it would permit the attorney general to rescind board pay she deems "more than reasonably necessary."