Caroselli, Beachler & Coleman, L.L.C.

Philadelphia Judge rules Pittsburgh-based Highmark does not clear excessive profits

A judge today dismissed a lawsuit that claimed Highmark accumulates "excess profits" that are in violation of state law, and that Highmark's administrators and executives make an "unreasonably high" salary. Highmark, Pennsylvania's biggest health care provider, was sued by former Highmark advisory committee members, Herman Wooden and Thomas Logan. Both men argued that Highmark's $1.2 billion in profits from 2005 to 2009 was unwarranted and inexplicable. In addition, Philadelphia's Court of Common Pleas Judge Patricia McInerney also disallowed arguments that Highmark should not be able to reinvest in its for-profit affiliates or that the company gave excessive bonuses to its administrators. The judge essentially stated that although the plaintiffs' arguments make sense, it is not for a courtroom to decide whether or not major profits for a nonprofit health insurer are warranted.

David Senoff of Caroselli, Beachler & Coleman, L.L.C. said today that his clients have already appealed McInerney's decision to Pennsylvania's Commonwealth Court. Senoff told reporters that Wooden and Logan "respectfully disagree with the trial court's ruling dismissing this case prior to any trial." Senoff added, "This is particularly true since the court found plaintiffs' case to be both logical and compelling." While a Highmark spokesman stated that the company is "pleased with the court's decision...under the Pennsylvania Nonprofit Corporations law."

The plaintiffs attempted to argue that although the law says that a nonprofit company may make an "incidental profit," Highmark's billions in revenue is hardly incidental. Senoff also argued that the billions in "incidental profit" has clearly been distributed to company executives and administrators as arbitrary bonuses and overpaid salaries, which is certainly against the law as it is written.

As for her response to those arguments, McInerney said that "Although plaintiffs and the public may look...aghast at the high level of compensation paid to the executives of this supposedly 'nonprofit' corporation, the court cannot find such payments to be unreasonable based upon outrage alone."

Spokespeople from Highmark claim that their executives make far less than the national average for nonprofit health insurance providers and that although the amount of money they manage seems high, the cost of running a health care company likely exceeds even the most liberal of expectations.

Source: PPG, 29 August 2013

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