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Blues' merger would mean big exec raises

The giant Pennsylvania health insurers also plan to cut 745 to 1,200 jobs if state regulators let them combine.

Joseph Frick would get $2.94 million as chief operating officer.
Joseph Frick would get $2.94 million as chief operating officer.Read more

Highmark Inc. and Independence Blue Cross would pay their top executives as much as $4.2 million more if they were allowed to merge.

Kenneth Melani, the chief executive of Highmark, who is expected to have the same job at the combined companies, would get a 31 percent raise, to $3.9 million from $2.97 million, including incentives, according to documents filed with the Pennsylvania Insurance Department.

Independence Blue Cross' CEO, Joseph Frick, who is slated for the role of chief operating office after the merger, would earn $2.94 million, the same as his current pay. In 2006, Frick's pay was $1.6 million.

State insurance regulators last summer demanded detailed information on how much top executives would be paid if the merger, which would create a $22.5 billion insurance giant, were approved.

The two biggest raises after Melani's $930,000 are planned for chief financial officer Nanette DeTurk and David M. O'Brien, executive vice president for government services, both from Pittsburgh-based Highmark.

DeTurk, who is in line to be CFO of the combined entity, could get a $635,098 increase in total pay, which includes possible annual and long-term incentives. O'Brien, head of Medicare operations, would get a $556,184 raise under the plan filed Thursday.

Lance Haver, director of Philadelphia's Office of Consumer Affairs, said yesterday that the raises were another "indication that the Blues have lost their social mission and operate more like for-profit insurance companies."

If the reason for the merger is "to better serve the public, then they don't need to raise executive salaries like this," he said.

The insurers have said that efficiencies from the merger, which would create the largest health insurer in state history and one of the largest in the nation, would spin off $1 billion in savings to benefit subscribers, the uninsured and other charities.

Part of the savings would come from the elimination of 745 to 1,200 jobs, the companies have projected.

Filings this week also showed the proposed senior leadership of the merged company. It gives a slight edge to Highmark, whose executives would hold nine of 17 positions.

Each company appointed 10 directors to the new board, not including the two CEOs. In Independence Blue Cross' case, that means 24 directors would step down, based on the board roster on March 1. Highmark has a 20-member board.

Pennsylvania Insurance Commissioner Joel Ario said last month that his goal was to reach a decision on the merger by Dec. 31.

Go to for more about the proposed merger, including the salary document and previous Inquirer coverage.