Highmark remaking executive leadership : Bill Toland

Highmark Inc., Pittsburgh's largest health insurer, has spent the months since the collapse of a proposed merger with Philadelphia's Independence Blue Cross restructuring its top leadership and tweaking its organizational flow chart.

Retirements that went into effect March 31 include those of Aaron Walton, senior vice president of corporate affairs for Highmark; Gino Francavilla, senior vice president of operations; and Tyrone Alexander, executive vice president of human resources and administrative services.

Also on the list is James Klingensmith, executive vice president of health services, as well as Highmark's chief "merger integration" officer, meaning he was in charge of the proposed Highmark-IBC consolidation.

Mr. Klingensmith's departure may be the most notable. He was, seven years ago, one of the favorites to succeed outgoing Highmark CEO John Brouse. That job instead went to Kenneth Melani, who remains chief executive.

In such a large company, personnel moves are constant, yet this is still an unusual number of high-profile departures in a short period.

It may be the largest en masse departure of senior personnel since 2003, shortly after Dr. Melani was elevated to Highmark's CEO post. That restructuring led to 17 executive-level departures and retirements, in Pittsburgh and in Highmark's Camp Hill offices.

While Highmark along with its peers in the insurance industry is feeling financial pressures -- the Pittsburgh insurer has capped merit raises, slowed hiring and reduced the number of contracts with outside vendors and freelancers -- the executive departures do not seem to have resulted from an outside cry for administrative cost-cutting, as was the case in 2003.

They were planned retirements, a spokesman said.

"We needed them during the integration planning process," said Michael Weinstein, Highmark spokesman. "And we all know what happened to that."

He added: "The tremendous contributions of these individuals helped make Highmark a financially strong company, reinforced our mission to serve all segments of the community, and helped improve the company's culture and foster a talented and dedicated work force."

Deborah Rice has been promoted, meanwhile, from Highmark's senior vice president of regional markets in the western region to executive vice president of health services. She now occupies one of the highest positions in the company, holding Mr. Klingensmith's old job.

Here's another personnel move: Highmark will soon have a new president of operations at Mountain State Blue Cross Blue Shield, a Highmark-affiliated insurer that operates in West Virginia.

For 10 years, the two insurers have been business partners, and Highmark has been formally operating Mountain State as a subsidiary since 2004. Highmark's central command in Pittsburgh has gradually been assuming more operational, financial and health-support work since then.

The new president, Fred Earley, will be in place by July 1. Since 1995, Mr. Earley has served as Mountain State's senior vice president of external operations, its general counsel and its corporate secretary.

He's replacing outgoing Mountain State CEO Greg Smith and, like his predecessor, will remain in charge of local sales, marketing and provider contracting, said Mr. Weinstein.

"They know their marketplace," he said.

Next on the agenda for Highmark is midyear renewals, typically a big deal for the small businesses that negotiate benefits through group brokers. Highmark has requested permission to increase their premiums, with an average annual percentage increase in the teens.

"The last few years, we've seen the averages in the single digits," said John Seltzer, an employee benefits analyst with Downtown-based BBR Services. "This year, it's well into the double digits, low to high teens," a range confirmed by Mr. Weinstein.

For individual products, Mr. Weinstein said, the range was generally in the midsingle digits to teens. "Those programs are challenging because the claims costs are exceeding the premium revenues that have been approved," in part because of increased use, he said.

Highmark also is in the process of negotiating a new contract with Butler Memorial Hospital in Butler. Without a new pact, the insurer's commercial contract with Butler Memorial is set to expire on June 30, barring an extension of terms or some last-minute intervention of the part of the state.

Last week, Highmark sent 22,000 letters to its members who have used Butler Memorial in the past year, as well as to physicians and area employers, telling them the contract is nearing its end and that the parties continue to negotiate new reimbursement rates.

For now, though, Highmark policyholders can continue to visit Butler Memorial with no change in their benefits.

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