* Joseph Swedish was CEO of Trinity Health
* Healthcare reform drives change
* WellPoint faces challenges with exchanges
By Caroline Humer and Susan Kelly
Feb 12 WellPoint Inc named Joseph
Swedish, the top executive in a large non-profit hospital
system, as the health insurer's new chief executive officer
after a half-year search that began when former CEO Angela Braly
abruptly stepped down in August.
The No.2 U.S. health insurer faces a challenging year in
healthcare reform as the Affordable Care Act brings more changes
in 2014, including the introduction of electronic marketplaces
where insurers will sell directly to consumers.
WellPoint, which sells health insurance as Blue Cross Blue
Shield, holds the No. 2 spot in the United States behind
UnitedHealth Group Inc. It had revenue of $61 billion in
Swedish, 61, has been CEO at Trinity Health, the tenth
largest U.S. hospital system and fourth largest Catholic
hospital system, since 2004. Trinity has 47 hospitals and had
revenue of $9 billion in 2012.
CRT Capital Group analyst Sheryl Skolnick was surprised by
the selection of a manager who is relatively unknown in the
"This is really a critical year for the company. It is a
year when you want to have the top talent focused on making sure
the company transitions well into the new world of health
reform, preserves market share and grows with additional
markets," Skolnick said.
Braly, an outsider who took the role in 2007, stepped down
in August under pressure from investors who were unhappy with
the company's financial results. She had earlier
issues as well, drawing the attention of President Barack
Obama's administration over a proposed premium rate increase in
California that she was pressured to scale back. Braly also
publicly criticized the President over other issues and
Democrats rallied behind him for support for healthcare reform.
Since August, the company has been run by interim CEO John
Cannon, and Swedish will take over March 25. Cannon will stay
with the company as executive vice president of legal and public
After missing analysts' estimates in four consecutive
quarters, the health insurer last month reported
better-than-expected revenue in the fourth quarter, with Cannon
at the helm.
It was unclear how the move would affect the company's
stock. WellPoint shares closed at $66.01, unchanged, and traded
lightly after hours.
INVESTORS SEE CRITICAL YEAR
David Heupel, an analyst with Thrivent Investment
Management, which does not own WellPoint shares, said Swedish
will have critical decisions to make this year as the insurer
sorts out which products it will sell on the new insurance
exchanges and in which markets.
"It's an interesting pick," Heupel said. "It's not a
seasoned HMO veteran they are bringing in. However, it is a
seasoned executive who is obviously extremely familiar with the
healthcare industry and all the components of it."
Insurers like WellPoint and hospitals already have been
facing some of the vast changes the law has brought, such as new
taxes and payment methods for government insurance like Medicare
As CEO of Trinity Health, a hospital group that also had an
insurance business, Swedish said that he had experience with
both hospitals and insurers.
"The tradition of separation of the two sectors is rapidly
closing. That gap is at times, I think, going to become very,
very minimal," Swedish said in an interview.
"There's absolutely no doubt that there's a convergence
happening on many fronts in healthcare," he said.
Swedish, who served on the board of regional insurer
Coventry Health Care Inc, also faces the integration of
Amerigroup, a $4.5 billion insurer with a large Medicaid
business, which WellPoint bought at the end of 2012.
Analysts have said that Amerigroup's CEO Jim Carlson was a
possible choice for the WellPoint CEO job.
Wedbush Securities analyst Sarah James said other insurers
have looked outside for its top jobs. Humana Inc Chief
Executive Officer Bruce Broussard, a former executive from
pharmaceutical distributor McKesson Corp, also was
recruited from outside the health plan industry, she noted.