Executives keep health perks while workers' benefits are cut

By Gary Strauss, USA TODAY

Though millions of workers face rising health insurance costs and dwindling benefits in 2011, many CEOs will retain employer-paid medical plans and health benefits worth thousands of dollars.

Hundreds of top corporate managers get medical benefits and supplemental coverage far beyond what's offered to rank-and-file employees. Benefits include "executive" physicals and reimbursements for out-of-pocket costs, deductibles and co-payments, according to corporate filings.

"The great hypocrisy is this is going to the people best able to pay for this stuff," says Nell Minow of The Corporate Library. "Executives should pay for this on their own or be covered by the same plan as everyone else at the company."

Some companies are eliminating gold-plated medical benefits to senior managers, a move that's at the discretion of corporate directors. And the new health care law could make the plans more costly in the future. But, for now, most company plans — covering both rank-and-file employees as well as executives receiving supplemental benefits — are grandfathered at least until 2014.

Lawyer Scott Sims, a health care specialist with corporate consultant Aon Hewitt, estimates up to 50% of publicly held companies offer senior managers enhanced health care plans.

Polaris Industries' "Exec-U-Care" plan provides five senior execs up to $50,000 a year for health coverage, the snowmobile and motorcycle marketer says in Securities and Exchange Commission filings. Polaris also covers yearly Mayo Clinic exams for CEO Scott Wine, other executives and spouses. "Staying healthy is part of our culture," spokeswoman Marlys Knutson says.

Kohls provides senior execs with up to $50,000 in yearly supplemental health pay, a perk needed for "a competitive total rewards package that supports retention of key talent," the retailer says in its latest proxy statement.

Cereal marketer Ralcorp gives execs up to $10,000 "per illness" for expenses not covered by its standard employee health plan. According to Ralcorp's compensation committee, the plan "encourages corporate officers to proactively address health issues."

Health care perks can be an enticement for the newly hired and departed. Last year, grocery chain Fresh Market offered incoming CFO Lisa Klinger up to $50,000 to cover annual medical bills — on top of a $330,000 base salary, $100,000 signing bonus and company car worth up to $65,000. And Penn Virginia CFO Frank Pici, who's resigning Dec. 31, will get $800,000 in severance pay plus a half day "executive health evaluation" at the University of Pennsylvania. (Fresh Market and Penn Virginia did not return calls.)

Typically, the health care costs are a small part of overall compensation and less than, say, personal use of the corporate jet. Wine's medical bills cost Polaris $14,000 last year, while his overall compensation was $1.9 million. Del Monte CEO Richard Wolford got $22,680 for medical bills. Total comp: $8.9 million.

"These are just a small piece of a larger trend. Ultimately, they will go the way of the buffalo," says Alden Bianchi, head of the executive compensation practice at law firm Mintz Levin.

From 2003-09, the average cost of employer-sponsored family health care premiums rose 41%, according to The Commonwealth Fund, which promotes health care reform.

Some firms are cutting back. MetLife and Seagate Technology have cut executive physicals. Burger King stopped providing senior execs and dependents up to $100,000 a year for out-of-pocket costs. But the fast food chain boosted their allowance for discretionary perks by 25%.

"Even if they do away with these programs, companies will find a way to make up the costs," says shareholder activist Eleanor Bloxham of The Value Alliance. "It's the psychology of taking care of those at the top."

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