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WellPoint Executive Churn Reaches Down to Top 5

October 29, 2007
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New WellPoint CEO Angela Braly is quite the agent of change. With three more top executives set to leave in the coming year, much of the old management team is gone, raising concerns about turnover in the upper ranks of the nation's No. 2 health insurer.

WellPoint’s announcement that three more top executives plan to leave within the next year follows the departures of former longtime CEO Larry Glasscock, who retired in June, and former CFO David Colby, who was forced to resign in late May regarding unspecified violations of WellPoint’s code of conduct.

By this time next year, the Indianapolis-based company will no longer employ any of the five highest-paid officers listed in April on its most recent proxy. According to published reports, the departures will increase the total number of senior-level departures to 14 since WellPoint was created in November 2004 by the merger of Anthem and WellPoint Health Networks.

The management shuffle was part of a larger restructuring of WellPoint’s business lines, which analysts viewed as Braly’s first strategic move. The company separated its consumer and commercial business into two units, while a new division, called the comprehensive health solutions business unit, will focus on health care quality and care management costs.

The commercial business unit will include small and large local group customers, national accounts, UniCare and the specialty products division. The separate consumer business unit will include senior and Medicaid programs and the individuals-under-65 segment.

Each new segment will have a new president and CEO leading the division, all of whom were hired internally, which is a good sign because “they are people who know the organization,” says Sally Rosen, a senior financial analyst with Oldwick, New Jersey-based A.M. Best Co.

The changes will not affect the day-to-day operations of the company that have the greatest impact on buyers, such as pricing and claims processing, analysts say.

As part of the realignment, John Watts Jr., whom many observers considered a top candidate for the CEO job, resigned from his post as president and CEO of the combined commercial and consumer business unit but will remain with the company until the end of the year.

WellPoint says that Joan Herman, who was named president and CEO of the newly created consumer business unit, will retire in mid-2008, and chief actuary Alice Rosenblatt will retire in the second half of 2008. The company said it plans to have Herman’s replacement in place by her retirement, and Cindy Miller, senior vice president of the actuarial commercial and consumer business, will replace Rosenblatt.

WellPoint spokesman James Kappel downplayed any worries that the turn¬over will hurt the company. “Succession planning is one of WellPoint’s core strengths,” he said.

In early October, WellPoint tapped homegrown talents Ken Goulet, president for national accounts, and Dijuana Lewis, president of the local business unit, to run the new commercial division and health solutions business unit.

Dan Dalton, director of the Institute for Corporate Governance at the Kelley School of Business at Indiana University, wondered if any board can plan for so much turnover among executives in so little time.

“There’s no way even a company of WellPoint’s scale can contemplate those kinds of transitions under any kind of succession plan,” he said. “Even with a decent crisis plan in place, you don’t consider that you’re going to have to do this several times in a six-month period.”

This story was written from reports originally posted by Financial Week and Business Insurance, sister publication of Workforce Management.

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