By Graef Crystal
(534 words; posted Thursday, Sept. 18)
(Note: "Maximum Wage" is a monthly column about the compensation of top corporate CEOs.)
One particularly egregious form of executive compensation goes under the bland label of Supplemental Executive Medical Insurance. Contrary to what its name might imply, this insurance does not cover the vitamin supplements that are favored by folks of a certain age. The typical employee fortunate enough to work for a company that supplies health insurance these days is enrolled in an HMO or PPO (preferred-provider organization) or some other system that limits his or her choice of doctors. The lucky few who still have traditional fee-for-service insurance generally must pay various deductibles and co-payments themselves. Frills like dental and psychiatric care probably have higher co-payments and annual ceilings. Very few workers are lucky enough to have insurance that covers things like eyeglasses and cosmetic surgery.
| Senior executives who qualify for supplemental medical insurance get their primary coverage from the basic company plan. But the company also reimburses them for any expense the basic plan doesn't cover. So the supplemental plan will reimburse the executive for his basic plan deductible. And if the basic plan offers 80 percent reimbursement above the deductible, the supplemental plan will pay the remaining 20 percent. And if the basic plan offers 50 percent reimbursement above the deductible for psychiatric care, the supplemental plan will pay the remaining 50 percent. And if the basic plan offers no payment at all for a spouse's tummy tuck, the supplemental plan will pay 100 percent of the cost.|
This special treatment is especially egregious in the era of managed care. Employees whose choices about doctors and treatments are now limited and directed by others are reassured that the quality of managed care is as good as or better than the old way. Yet the senior executives of the company--who make the decisions about what kind of health insurance employees get, and who reassure them that going to managed care involves no sacrifice of quality--get the company to pay the cost for themselves and their families to opt out.
In the most recent proxy statement of RJR Nabisco, CEO Steven F. Goldstone is reported to have received $3.7 million in "miscellaneous" compensation of this sort. (His total compensation last year, by my calculation, was $14.5 million.) The proxy footnote allegedly explaining this is turgid, but rewards a struggle. (Click here to read it.) It says he got supplemental medical and other forms of insurance, but it gives no details or cost estimates. There is a special irony in the CEO of a tobacco company getting gold-plated health care insurance, of course, since his company has done so much to raise health care costs shared by everybody else. Links Explore the perks offered the modern CEO: Peruse before and after plastic surgery photos (which include some tummy-tuck and breast-augmentation shots), pick a car from Executive Limousine Service ("Since 1987"), and order a henchperson from Bodyguard Services ($50 per hour, three-hour minimum). Then read the story of one ordinary citizen's maltreatment by an understaffed HMO. Graef Crystal, an expert on executive compensation, writes a monthly column on the subject for SLATE.
Illustrations by Peter Kuper.