Delta Dental is the nation's biggest provider of dental insurance. It has 56 million patients in its network, about one-third of all dental patients in the country. Last year, the 39 non-profit Delta Dental groups across America combined for $15.2 billion in revenue. It's a massive organization. Since it's not-for-profit, Delta Dental doesn't pay federal or state income taxes.
Delta Dental is registered as a 501(c)(4) not-for-profit, which means it's a mission-driven organization and must give back to the community to retain it's non-profit status. Generally, according to the IRS, 501(c)(4) organizations have more lattitude than those classified as 501(c)(3), like Goodwill, which can accept tax deductable donations. Still, according to the IRS, organizations like 501(c)(4) organizations like Delta Dental must focus on the social mission, not the operation of a business.
A 501(c)(4) says "an organization is not operated for the promotion of social welfare if its primary activity is carrying on a business with the general public in a manner similar to organizations operated for profit."
Our investigation found many Delta Dental executives and board members are paid like they work at massive for-profit corporations. In 2009, 5 Delta Dental executives received more than $3 million in pay and benefits. Steve Gaal III, the former CEO of Delta Dental of Missouri, received $3.4 million, making him the second highest paid Delta Dental executive in the country that year, much of it came from his 3 separate retirement accounts. The 2009 tax records filed by Delta Dental of Missouri reveal extraordinary pay in great detail. You can see the bonuses, and perks like free travel for spouses for board members and executives, and club memberships for executives. We also obtained the 2010 records, the most recent report available.
In 2009, Delta Dental paid Dr. Richard Haffner $40,000 for his 1 hour of work per week, which is the equivalent of having a 40 hour a week job paying $1.6 million. Delta Dental also reimbursed Haffner and other board members for their spouse's travel expenses. You can see the pay and perks for executives and board members in the documents uploaded in my blog.
Nationally, many Delta Dental executives making $100,000 or close to it, received bonuses that double, triple or even quadruple their pay. In 2010, a Delta Dental of Michigan executive was paid a salary of $216,000 and a bonus of $608,000. Another Michigan executive earned a salary of $659,608 and a bonus of $789,500. In 2009, a New York executive received an $84,000 salary and a $312,000 bonus. In 2009, a Delta Dental of Missouri executive received base pay of $156,375 and got a bonus of $243,945. Many of the executives who got bonuses that far exceed their base pay are in sales, and the bonuses reflect the business they brought to Delta Dental.
Of course, the compensation in the bonus column of the documents uploaded in this blog represents a small part of what most of us would consider bonus pay. If you include "deferred compensation," which can add millions of dollars in executive pay, even more executives are getting extra money that can increase their base pay five fold.
Not surprisingly, Delta Dental of California (by far the largest Delta Dental) has the highest salaries in the country. The most interesting part of the California records is the disclosure that the California not-for-profit paid its Board of Directors more than $1 million in 2010. Five board members received more than $100,000 each, a ridiculous amount of money for a director on a non-profit board. Here are the records for Delta Dental of California in 2010.
Delta Dental of Michigan, Ohio and Indiana are managed by the same group of Michigan-based executives. Here are the records for Delta Dental of Michigan in 2010, Delta Dental of Ohio in 2010, Delta Dental of Indiana in 2010. Our investigation found the Michigan Delta Dental reimbursed executives for 1st class/charter travel and spouse travel in 2010. In addition, 5 executives with this group received more than $1 million in compensation in 2010.
Delta Dental of Missouri CEO David Haynes insists the executive and board member compensation is reasonable based on surveys of large non-profits and for-profits in the healthcare industry. That's right. The Delta Dental used major for-profit companies as part of the survey to determine pay and benefits for executives and directors.
Haynes, and other Delta Dental representatives are quick to point out that the organization spends about 90-percent of its revenue on patient services. Nationally, the non-profit Delta Dentals have also donated at least $47 million, according to the Delta Dental Plans Association, an umbrella group for the Delta Dentals.
Bart Naylor, a financial analyst with Public Citizen, a major consumer advocacy group in Washington, told me our findings were "disturbing," adding that when non-profits behave like for-profits "we have a serious problem."