January 30, 2019; California Healthline
Before we delve into this newswire, it is worth restating that the lack of access to high quality, affordable, and timely dental care is a problem in poor communities all across this nation, affecting the overall health and well-being of children and families.
This is good context to remember as we mull over the fact that Delta Dental of California, which operates as an insurer in 16 states and the District of Columbia, is facing mounting criticism for paying exorbitant compensation to its CEO, executive staff, and board members, devoting a pittance of its revenue to charitable work even as it receives the benefits of nonprofit tax status. The nonprofit in its 2017 annual report claims that is motivated by a vision to “increase access to dental care for those who can’t afford it.” But as it plans to spend $155 million to acquire a 49.5 percent stake in for-profit health insurance provider Moda Health, consumer advocates are calling foul.
They point out that the company paid its chief executive, Tony Barth, $14.3 million in 2016, two years before he was fired for having a secret relationship with a subordinate. The next nine highest-paid Delta executives earned more than $1 million each that year, bringing the total compensation for the top 10 to more than $30 million in 2016, according to the insurer’s latest available tax filing.
The California Department of Managed Health Care (DMHC), which is the entity most likely to have standing in court on this matter, cannot alter Delta’s nonprofit status, but could prevent the purchase if it decides that the money being used for the purchase won’t benefit the public or even those who pay high rates.
Complicating the issue of nonprofitness is the fact that Delta Dental is a mutual-benefit corporation, meaning it answers to, and is established to benefit its rate-paying members, but in its founding documents, it committed to “assist the people of California.”
Going back to the issue of compensation, the company has declined to disclose its executive pay for 2017 or 2018. But perhaps equally as distressing is the compensation paid to board members, which ranged from $46,000 to $203,000 in 2016 for one to two hours of work a week. Board chairs received in the range of $172,000 to $223,000. This is not the first time that the implications of paying board members at health insurers has come up; see here for the Massachusetts Attorney General’s reaction, which resulted in a cessation of the practice in that state. As it happens, that case also involved an errant overpaid former executive who received a golden parachute amounting to $11.3 million. Such stuff is not rare in the nonprofit wing of the insurance industry.
Delta Dental of California defends its pay structure with the standard comeback, “We need to attract top executive talent to provide best-in-class service to our enrollees/members. Therefore, we are guided by a ‘pay for performance’ philosophy and employ many governance tools to ensure that executive pay is appropriate.”—Ruth McCambridge