Newsflash: Leslie Margolin, president of WellPoint’s Blue Cross of California — the company that single-handedly saved the cause of healthcare reform by trying to hike premium rates at the most politically inopportune time — has resigned after two and a half years on the job. WellPoint says the resignation had nothing to do with the rate dispute. But it got me thinking about some of the stupid things managed care executives have done over the past 13 years (my tenure covering the industry). Here are my top five dumbest acts in managed care.
1. UnitedHealth Stock Options Backdating Scandal: William McGuire, M.D., chairman and chief executive of UnitedHealth – who is widely considered the driving force behind the company’s rapid and successful rise to prominence – resigned in 2006 in the wake of a stock options backdating scandal that rocked the company. An independent report commissioned by United’s board said that 1 million options granted to McGuire were probably backdated, along with millions of other options granted to thousands of employees. The scandal made McGuire — whose options were worth about $1 billion — another poster boy for executive hubris and corporate greed.
2. Vogt Speech: Remember John O. Vogt, M.D.? He was the Kaiser utilization management specialist who in 1995 made perhaps the dumbest speech in the history of managed care, stating that he and a colleague — while drinking bourbon and whiskey on a flight to Los Angeles — came up with a plan to reduce Kaiser’s medical costs in Texas by 30%. Two years later, the speech surfaced as evidence in a wrongful death lawsuit in which the family of a Texas man claimed his death from a heart attack was related to the cost-cutting initiative. Kaiser settled the suit for $5.4 million and subsequently exited the Texas market. Vogt apologized for the speech, stating it ”was an attempt at livening up a very dry subject…Many times during the presentation, I made facetious comments and attempts at humor that were not true statements.”
3. Colby and the WellPoint ”Code of Conduct:” David Colby – riding high as WellPoint chief financial officer and heir apparent to the CEO post — was forced to resign in 2007 for unspecified violations of the company’s code of conduct. It later came to light that Colby was being sued by various women, who according the Associated Press depicted him as “a world-class, love-’em-and-leave-’em sort of guy who romanced dozens of women around the country simultaneously, made them extravagant promises and then went back on his word with all the compassion of a health insurance company denying a claim. One woman says Colby got her pregnant and harangued her via text message (“ABORT!!”) to terminate the pregnancy. He also allegedly…proposed to at least 12 women since 2005.” It’s hard to tell what’s true and what isn’t in these salacious claims, but as a general rule this type of behavior is bound to get you in trouble.
4. Tonik on The Daily Show: Hard to imagine why WellPoint’s Blue Cross of California agreed to participate in an Ed Helms report in 2005 on Comedy Central’s The Daily Show about Tonik — a health plan aimed at young and uninsured individuals. After all, the segment includes exchanges such as the following:
WellPoint executive: “It’s not their parents’ health insurance plan.”
Helms: “Their stupid health insurance covered everything.”
But then again, considering that Tonik went on to be one of WellPoint’s top-selling products, maybe this wasn’t such as dumb move after all.
5. WellPoint Trys to Raise Premiums in California up to 39%: Finally, as mentioned above, WellPoint’s attempt to push through hefty rate hikes for individuals in California created a political firestorm that gave Obama’s faltering healthcare reform effort the boost it needed for final passage. Rep. Michael Burgess (R-TX) summed things up in Congressional hearings on the proposed hikes when he asked WellPoint chief executive Angela Braly, “You had to know this was going to be trouble….Did you make a judgment as to whether this was the best time to do this?”
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