Blue Cross Blue Shield of Massachusetts has agreed to return an amount equal to former Massachusetts Blues chairman and CEO Cleve Killingsworth’s $4.3 million severance pay to subscribers.
Killingsworth, who resigned last year at the board’s request after the Blues posted a more than $100 million loss, does not personally have to return any money, however.
A onetime vice president of Excellus Blue Cross Blue Shield’s predecessor, Blue Cross Blue Shield of Rochester, Killingsworth moved to Blue Cross Blue Shield of Massachusetts as chief operating officer in 2004.
He had served as the Massachusetts Blues chairman and CEO for six years before leaving unexpectedly in March 2010 after the insurer posted a $149 million loss and saw an 89,000-subcriber drop in membership.
The Blues revealed in a March 2011 filing that Killingsworth would collect more than $11 million in post-retirement compensation, and the next day, Massachusetts Attorney General Martha Coakley kicked off a probe of his post-retirement payments.
“I understand why the public is outraged,” Coakley told a Boston Globe reporter at the time.
Killingsworth’s $11 million package includes previously earned salary as well as the $4.3 million severance package and several millions more in retirement pay he was contractually entitled to.
The retirement-pay rebate is outlined in a July 6 Massachusetts Attorney General’s office report detailing the results of the probe.
While the Blues new CEO and the insurer’s board agreed to the rebate “as a demonstration of good faith to the community,” the report states, “the fact that amount of the rebate or credit is equivalent to the severance should not be interpreted to suggest that either the AGO or the Board believe that no severance amount would have been appropriate.”
In response to concerns aired by the Massachusetts Attorney General’s office, the Massachusetts Blues board initiated a number reforms meant to tighten its CEO review process, the report states.
Once they started to air concerns about Killingsworth’s performance, the Blues board “moved swiftly and efficiently to identify the performance issues and to initiate a change,” the report states. But Killingsworth’s employment contract put him in line for significant payments if he was fired unless his termination came as a result of intentional misconduct.
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