Obamacare Co-Ops Hid Millions In Exec Pay, Consulting Fees

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Many of the Obamacare health insurance co-ops are either burying in obscure tax return footnotes vital information about extravagant compensation paid to their top executives or they’re simply not bothering to report it at all, according to a Daily Caller News Foundation investigation.

Among the worst offenders is the Chicago-based Land of Lincoln Mutual Health Insurance co-op, which reported that its chief executive officer, Daniel Yunker, was paid only $79,000 and chief financial officer Dennis Rizzo earned a mere $50,000 for 2013.

Land of Lincoln also claimed that Yunker earned only $3,956 and Rizzo $5,425 from “related nonprofits.”

William Donahue, the COO appeared to be the top earner at the co-op, earning a modest $165,000.

Left unstated were Yunker and Rizzo’s salaries at the Metropolitan Chicago Healthcare Council, the co-op’s official sponsor, was $460,186 for Yunker and $286,409 for Rizzo.

That made Yunker’s actual total annual salary $543,000, not $79,000, and $341,000 for Rizzo, not $50,000. Similarly, the co-op claimed on its tax return that its chairman, Kevin Scanlan, received zero dollars from a “related group” when in fact the MCHC paid Scanlan $916,403.

Overall, at least six non-profit co-ops reported in footnotes that consulting firms pocketed an additional $26.5 million for “management fees,” with large chunks of those payments ending up in the pockets of the top executives.

Top Salaries of Obamacare Coop Executives

On Tuesday, TheDCNF reported that 18 of the 23 operating non-profit co-ops paid their top executives salaries ranging from $263,000 to $587,000, according to 2013 IRS tax filings. Those figures appear to violate federal laws and regulations barring “excessive compensation” for tax-funded enterprises.

The co-ops were intended to be federally funded consumer-operated non-profits competing with private sector insurers in delivering healthcare to the working poor and others without health insurance.

More than a million Americans have enrolled in the co-ops since they began operating in 2011 with $2 billion in start-up funding included in Obamacare. The co-ops are overseen by the Department of Health and Human Services’ Centers for Medicare and Medicaid Services.

Aaron Albright, a CMS spokesman, told TheDCNF that “the use of federal CO-OP loan funds is prohibited from, among other restrictions, providing excessive executive compensation.”

Many of the co-op executives are better paid than the President of the United States, Members of Congress, Supreme Court Justices, U.S. cabinet secretaries and all 50 state governors.

Some have worried about the co-ops’ becoming tools for unjust enrichment in the health insurance field.

Bill Oemichen, a sitting member of the Federal Advisory Board on Co-ops set up by CMS, told a March 14, 2011, meeting of that panel that he feared unscrupulous co-op leaders and greedy consulting companies might seek “unjust enrichment” during the early formative years of the Obamacare co-ops.

“We want to make sure that there’s no unjust enrichment,” he told his colleagues, according to the official minutes of the meeting.

Non-profit watchdogs interviewed by TheDCNF were also surprised by the co-ops’ high compensation figures and deceptive reporting practices.

“I do question the fact that the salaries are not in the co-op’s 990s,” said Scott Amey, general counsel for the Project on Government Oversight, a non-profit watchdog. “It is a glaring omission.”

Three Health Republic co-ops — in New York, New Jersey and Oregon — set up by New York’s Freelancers Union, at first appeared to pay reasonable executive salaries. The three co-ops established by Health Republic received a total of $435 million in start-up funding from the federal government.

However, in “supplemental” tax return footnotes, the three co-ops reported paying $17.3 million for “management services” provided by Independent Workers Services, which has the same Brooklyn, New York, address as the Freelancers Union.

The Freelancers Union was founded by former labor lawyer and liberal political activist Sara Horowitz. She and then-state senator Barack Obama served together as board members of a New York-based liberal think tank.

At the Louisiana Health Cooperative, CEO George Greg Cromer, was reported to have been paid $105,000. Buried in the footnotes, however was the fact that the co-op paid $1.3 million to Terry Shilling, to serve as the Louisiana co-op’s “interim CEO” in 2013.

Shilling applied for and received the original $66 million in federal start-up money in 2012 for the Louisiana co-op. CMS officials awarded the funds to him even though he was convicted in 1998 on insider trading charges brought by the Securities and Exchange Commission.

Veronica Piotrowski appeared to earn $131,000 as the highest-paid executive of the Tempe, Arizona-based Compass Cooperative Mutual Health Network co-op. Kathleen Oestreich, the CEO, Jeaan Tkachyk the COO, and Tere LeBarron, the chief health officer, were reported to be unpaid for their work.

But entire Compass co-op management team comes from a for-profit partnership called Eastwick Strategy Group, which paid Oestreich $420,000, Tkachyk $296,000 and LeBarron $282,000.

Separately, the co-op also paid Eastwick an additional “management fee” of $2 million and another $5.4 million for “consulting.”

None of the co-ops returned repeated calls from TheDCNF seeking comment.