Humana has begun tying some executive compensation to whether the insurer’s customers are getting healthier.
Until its most recent fiscal year, the Louisville-based insurer provided an annual cash incentive based solely on whether the company met its earnings-per-share target. Now the bonus also hinges on health metrics including whether chronic patients have better health outcomes and whether people adhere more to their medication regimen, according to the company’s latest proxy statement, which was filed last week.
Humana spokesman Tom Noland told IL via email that the company’s board of directors’ Organization and Compensation Committee made the change “to incentivize our executives to take actions to improve the health of our members.”
While 80 percent of the cash incentive remains tied to whether the company hits its earnings-per-share target, 20 percent is now tied to a “consumer health participation performance metric (CHP.)
Noland said the CHP “focuses on increasing the levels of participation by our members in various programs and services proven to improve health outcomes and lower the cost of care.”
The new approach enables the company to align part of managers’ compensation with “the company’s strategic vision of improving the health of the communities we serve 20 percent by 2020.”
The CHP consists of five indicators, including:
- The completion of patients’ health risk assessment, which allows Humana “to identify the new members who have the highest risk and need for our clinical programs.”
- Engagement in the Humana at Home Chronic Care Program, which allows care managers to better help patients manage chronic conditions.
- Usage of the Humana Pharmacy, which, the company believes, leads to more patients adhering to their medication regimen.
Noland said that for each of the five CHP components, the company set its target at or above performance achieved in 2014. “The target and maximum levels were set to appropriately reflect an increase over our historical performance, taking into account our projected new member growth,” he said.
Alas, company leaders said that overall results last year were not good enough to get the bonus.
While the company recorded adjusted earnings per share of $7.75, which was above the target set for the bonus, “in the opinion of our management and the committee, the organization as a whole did not meet expectations in terms of financial performance and customer outcomes.
“Therefore, consistent with our compensation philosophy, the committee determined not to pay our Named Executive Officers any compensation under the 2015 (Management Incentive Plan.)”
Adjusted EPS exclude items such as costs related to the proposed merger with Aetna and higher-than-expected medical claims costs associated with patients the company gained through the Affordable Care Act.