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Health insurer CEOs see some significant pay bumps in 2017

The paychecks of most publicly traded health insurer CEOs increased in 2017. Companies' preliminary proxy statements also give a first look at what recently hired CEOs' pay looks like.

Anthem President and CEO Gail Boudreaux, who took the reins from Joseph Swedish in early November 2017, made about $2.2 million for part of last year. Most of that figure comes from about $2 million in stock awards that will vest in the future, according to the company's preliminary proxy statement.

Boudreaux's actual take-home pay for the two months she served in the top spot last year was $166,038. In 2018, her salary will be $1.4 million.

When Boudreaux took over, former CEO Swedish stayed on as Anthem's executive chair, a role he'll keep until May 18. After that he'll become a senior adviser to the CEO and a consultant until May 2020. Swedish's total compensation was $18.6 million in 2017, an increase of 12.7% over his 2016 compensation.

There are multiple ways to look at CEO pay reported by publicly traded companies. Total compensation reflects an executive's base salary, bonuses and non-equity incentives, as well as stock and option awards that may not vest for several years.

Realized compensation, on the other hand, shows what an executive pocketed in a given year. It reflects the base salary, bonus, non-equity incentive plan compensation and options exercised and stock awards that vested during the year. Realized compensation can vary widely year over year depending on when an executive chose to exercise their stock options.

For instance, Swedish's realized pay based on actual stock gains was $26.4 million in 2017, up 54.9% over the previous year. When Swedish transitions to a senior adviser role, he'll make $4.5 million a year while his previously granted equity awards continue to vest. He won't be eligible for any more equity awards in 2018.

Long Beach, Calif.-based Molina Healthcare's new CEO, Joseph Zubretsky, made considerably more than Boudreaux, although both executives entered their new roles in November. Zubretsky's total compensation was $19.7 million, while his realized pay was $4.2 million, which mostly came from a $4 million sign-on bonus, according to the company's preliminary proxy statement.

Dr. J. Mario Molina, who was fired as Molina Healthcare's CEO in May 2017 amid the company's poor financial performance, made $17 million in total compensation in 2017, up 69.2% over 2016. His realized pay, meanwhile, jumped $30.5 million from $5.6 million in 2016, the company reported.

That's because he received nearly $23 million in severance pay. His brother John C. Molina, the insurer's former CFO who was also fired from the company in May 2017, received $10.7 million in severance.

Cigna CEO David Cordani's pay totaled $17.6 million, an increase of 15.2% over 2016 thanks to a bigger bonus in exchange for Cigna meeting its financial goals, the Bloomfield, Conn.-based company said in its preliminary proxy statement.

"The board recognized Mr. Cordani's leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Despite two key retirements, he ensured a strong leadership team remained in place through a number of internal promotions," the proxy stated.

Though Cigna's proposed deal with Anthem fell apart last year after the federal government blocked it for threatening to harm competition, Cigna has already found another partner in pharmacy benefit manager Express Scripts. The two companies last week announced a $67 billion deal to merge.

Based on actual stock gains, Cordani's realized paycheck was $43.9 million, nearly double what he brought home the year before.

Bruce Broussard, CEO of Louisville, Ky.-based insurer Humana, made $19.8 million in total compensation in 2017, about $46,000 more than he made in 2016. But his realized pay based on stock gains doubled to $34.2 million year over year.

Finally, Medicaid managed-care insurer Centene CEO Michael Neidorff, who has helped his company become a dominant—and profitable—insurer on the ACA exchanges, made $25.3 million in 2017 total compensation, up 15% over 2016.

Neidorff's realized pay taking into consideration actual stock gains was $24.9 million, down 22.5%.

Aetna, UnitedHealth Group and WellCare Health Plans have not yet released proxy statements reporting their CEOs' executive compensation.

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