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March 3, 2009 Tuesday 10:00 AM EST

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Health Insurers Saw Investment and Enrollment Losses, Plus Top-Level Changes in 2008

Fran Lysiak

OLDWICK, N.J.

In a year marked by enrollment declines in fully insured commercial health plans, investment losses linked to the global credit crisis again dragged down profits for U.S. heath insurers in the final quarter of 2008.

The year saw executive-level changes, too, as Health Net shifted the responsibilities of top management when it reported its third-quarter earnings. Jay Gellert, president and chief executive officer is now focusing on strategy, while Chief Operating Officer James Woys is responsible for all of Health Net's operations. At the start of 2009, Coventry Health Care said President and Chief Executive Officer Dale Wolf would resign on Jan. 30, and named former CEO and current chairman Allen Wise to replace him.

Looming large on industry chiefs' minds are how efforts at overhauling the health care system will play out, along with the fate of revenue-generating Medicare Advantage health plans for seniors under a new Democratic-controlled White House and Congress.

Here's what they said during earnings conference calls:

We Just Disagree

Allen Wise, chairman and CEO, Coventry Health Care. With regard to a change in chief executive officers, it's really as simple as two reasonable parties disagreeing. In light of '08 results and my review of the business, the Board of Directors believed that continuing substantial oversight involvement by the Board was necessary and Dale Wolf, who led the company during the last four years, disagreed.

Jim Woys, COO, Health Net: At the November investor conference, I introduced a new management team and made a commitment that we would focus our efforts on achieving demonstrable improvements in three areas: profitable growth, health care cost trend management and operational performance. We've made great progress over the past several months. These actions include...reconfiguring our medical management organization to more effectively manage care in local markets.

Health Reform

H. Edward Hanway, chairman and CEO, Cigna: Our investments in the select group, individual and voluntary segments will improve our position in areas which could be favorably impacted by reform. At the same time, our minimal exposure to Medicare will insulate us from an area where margin contraction in the short-term is possible.

Mike McCallister, president and CEO, Humana: 2009 is also a very big year in terms of getting clarity around the long-term nature of the Medicare Advantage program as we play through the politics and the decisions that have to be made around how the private [sector] is going to play here in the Medicare space.

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Ron Williams, chairman and CEO, Aetna: We expect health care reform to be a major part of the national debate in 2009, and Aetna is at the forefront of this effort. By forging strong public and private partnerships, together we can address the challenges facing our current health care system, those of access, cost and quality.

Medicare Advantage

McCallister: With rates for 2010 due out April 6, we were already looking to next year as well as 2011...There seems to be a general consensus of questions around, one, will seniors go back to original Medicare when private fee-for-service [goes] away? Two, if Medicare Advantage payment rates are adjusted downward, will we be able to offer enough benefits to make the products attractive to seniors?

Angela Braly, president and CEO, WellPoint: We are working closely with CMS, and marketing and enrollment of the company's Medicare Advantage and Medicare Part D products have been suspended until remediation efforts have been substantially completed.

Specialty Business=Revenue

Wise: As we had an abundance of success in growing revenue here on all fronts from specialty businesses to a huge increase in government programs, Medicare, I think that we really ended up with more on our plate here -- and this is my opinion only, than we had the ability to manage well.

Steven Hemsley, president and CEO, UnitedHealth Group: Ingenix is a significant supplier to the health care industry and is being impacted by economic and industry trends...The federal stimulus package will have a strong health IT element, and Ingenix should participate in that significant market expansion.

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)

March 4, 2009

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