WellPoint Inc., the second-biggest U.S. health insurer, has picked a new CEO from outside the industry who says his work with hospitals and doctors will help smooth the insurer’s path in a time of change.

WellPoint named Joseph Swedish, 61, CEO of the nonprofit Catholic hospital system Trinity Health Corp., as its next leader after a six-month search. He replaces Angela Braly, who left WellPoint last year amid investor discontent over the Indianapolis-based insurer’s performance.

The new CEO will be under pressure as the U.S. health care law transforms insurance markets starting next year. WellPoint, the top seller of small business and individual plans, has been questioned by investors after missed profit estimates and falling enrollment during Braly’s tenure. The board’s choice of a hospital executive is a surprise during such an uncertain period for health plans, says Sheryl Skolnick, an analyst at CRT Capital Group in Stamford, Connecticut.

“I don’t think this is the time to experiment,” says Skolnick. “Bringing a little hospital knowledge to a health plan won’t hurt. But not hurting, in my view, isn’t enough.”

Swedish headed Livonia, Michigan-based Trinity Health, a system of 47 hospitals in 10 states, since December 2004. He said his hospital experience and financial results were plenty relevant to the health-insurance industry.

‘Fundamental shifts’

“There are some very fundamental shifts going on that represent a convergence of the provider and payer sectors,” says Swedish. He plans to focus on tighter coordination with doctors, investing in information technology to help consumers learn more about their care choices and working to bring medical costs down.

Swedish said his first job when he takes over March 25 is reassuring WellPoint’s investors.

“What I’ll be working on in the coming weeks and months is developing a significant, credible, strong story regarding the growth and performance of this company,” he said. “That’s what the investor community wants to hear. I think they want to get a strong sense that we are in fact predictable and reliable.”

Before Swedish’s selection yesterday, investors and analysts had focused on industry candidates, including Ronald Williams, the retired head of insurer Aetna Inc., and James Carlson, who ran the Medicaid insurer Amerigroup Corp. and engineered the sale of his company last year to WellPoint for $4.9 billion. Also rumored was interim CEO John Cannon, who served as WellPoint’s general counsel and will remain with the company.

Surprising choice

“Surprised,” says Ana Gupte, a Sanford C. Bernstein & Co. analyst in New York, reacting to the hiring. “I have actually not heard of him prior to this. WellPoint is showing a focus on integrated health delivery with this appointment.”

WellPoint, which owns Blue Cross plans in 14 states, was little changed in New York trading yesterday. The shares have gained 2.9% over the past 12 months, as the top U.S. insurer, UnitedHealth Group Inc. of Minnetonka, Minnesota, rose 6.9%.

CEO salary

WellPoint will pay Swedish a salary of $1.25 million, with a bonus of as much as $3.75 million more, according to a company filing with U.S. regulators. He will also get stock options this year worth as much as $8 million and $3.56 million to compensate for leaving Trinity.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

 

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