N.Y. court lifts some limits on providers’ and insurers’ executive pay
The New York state Court of Appeals recently ruled that providers and health plans that contract with the state may pay executives more than $199,000 a year as long as they are not using state funds.
Chief Judge Janet DiFiore said it was unconstitutional to penalize such providers or plans if they paid their executives more than $199,000 annually from any source of funding—state or private. The Department of Health exceeded its authority with “soft caps” by “attempting to regulate compensation from all sources,” according to the appellate court, which agreed with a lower court ruling.
But the “hard cap” is still intact, absent any waivers. Under that provision, contracted providers and insurers can’t use state funds for executive compensation that exceeds $199,000. It also caps administrative spending to 15% of their total operating expenses.
Gov. Andrew Cuomo signed an executive order in 2012 seeking to curb abuses in executive compensation and administrative costs. It applies to providers or insurers that receive more than an average of $500,000 from the state, namely from Medicaid, during a two-year period.
Also, 30% of the organization’s total annual revenue has to come from the state.