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Coakley: Pay For Nonprofit Directors Unjustified

By Bob Salsberg, Associated Press
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BOSTON (AP) – Attorney General Martha Coakley said Thursday she would file legislation to outlaw public charities in Massachusetts from compensating directors after a review by her office found no justification for the state’s four largest nonprofit health insurers to continue paying board members.

Coakley has been sharply critical of those firms in recent weeks for paying five-figure salaries to its directors while health care costs were soaring in Massachusetts. Since her review began, Blue Cross and Blue Shield of Massachusetts — the state’s largest insurer — and Fallon Community Health Plan announced they would suspend compensation to board members.

WBZ NewsRadio 1030’s Mark Katic reports.

But Harvard Pilgrim Health Care and Tufts Health Plan said they would continue the practice.

Coakley said the companies, which enjoy tax and other benefits provided to nonprofits, were given an opportunity to provide a rationale for paying directors but failed to do so.

“We did not believe in the course of the investigation there was an adequate response or justification for why those board members as opposed to any others in Massachusetts should be compensated,” she said.

The insurers had defended the compensation by claiming their boards deal with highly complex issues that require directors to devote considerable time and effort to their duties. The companies also argued that they compete for board members with national, for-profit insurance firms.

Coakley said her review found no evidence that directors faced tasks more unique or complex than boards of other nonprofits, such as hospitals, that have uncompensated boards.

In the case of Harvard Pilgrim, the report found that its directors worked a total of about 2,000 hours last year, averaging about three or four hours per week, per board member.

Coakley said compensation also increases the potential for conflict of interest among directors.

Officials of Harvard Pilgrim and Tufts did not immediately return calls seeking comment on the report.
Coakley said her legislation would bar nonprofits from paying board members unless they sought and received permission from her office. She said there might be “rare instances” in which such a waiver is warranted.

The legislation would apply to all of the approximately 22,000 registered public charities in Massachusetts, but the attorney general said her office’s review identified only a handful aside from the health insurers that maintained anything other than volunteer boards.

“Companies like Harvard and Tufts have just not gotten with the program,” said Sen. Mark Montigny, D-New Bedford, who agreed to sponsor the bill in the Senate.

Montigny, who along with Coakley commended Blue Cross and Blue Shield of Massachusetts and Fallon for suspending board pay, said there are plenty of intelligent and accomplished people serving voluntarily without pay on charitable boards, and noted that many of those people are highly paid in their own jobs.

Rep. Martha Walz, D-Boston, who is sponsoring the bill in the House, said the notion of compensation for voluntary directors is a contradiction in terms. She said service on a nonprofit board is a prestigious honor that many seek out.

“For most directors, the expectation is that you give financially, not that you take financially from that nonprofit organization,” Walz said.

Coakley also said Thursday that her office would begin publishing an annual report detailing any payments given to
charitable board members and the rationale provided by those boards for the compensation.

The attorney general and the lawmakers both stressed that they support the not-for-profit model for health care in Massachusetts and do not want to see more hospitals or insurers swallowed up by private, for-profit firms.

Veronica Miller, executive vice president of the state’s largest union of health care workers, said in a statement that she supports Coakley’s actions.

“The attorney general is correct that board member compensation is a potential barrier to independent oversight and governance in the case of these health insurers,” Miller said.

(Copyright 2011 by The Associated Press.  All Rights Reserved.)

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