Blue Cross Receives a Vote of Confidence

Blue Cross of California said Sunday that its 18-member board, at a special meeting, voted unanimously to express its “unqualified support and confidence” in Leonard D. Schaeffer, chairman and chief executive, who has come under criticism from several board members for recent management actions.

The nonprofit health-care organization also said that within three weeks it would file an amended plan to create a public health-care foundation. A previous plan unraveled when a proposed merger between Blue Cross’ WellPoint Health Networks subsidiary and Health Systems International was called off last month.

Two Blue Cross directors had said last week that they might call for Schaeffer’s resignation at the Sunday meeting if they could garner sufficient backing, but Blue Cross executives said no motion was made seeking his resignation or termination.

The special meeting was called after a group of eight Blue Cross directors asked to meet to discuss the failed merger. WellPoint and Health Systems, two of the nation’s largest managed care companies, agreed in December to call off the deal after nine months of acrimonious negotiations and a bitter struggle between Schaeffer and Health Systems Chairman Malik Hasan over control of the new company.

The merger had been crucial to nonprofit Blue Cross’ plan to switch to for-profit status. Under state law, nonprofit health-care organizations that convert to for-profit status are required to compensate the state by an amount equal to the company’s total value. Blue Cross had proposed to meet that obligation by creating twin health-care foundations with a total endowment of $3.3 billion.

State regulators have said the company is still required to fund the charities. The company offered no details about its new proposal Sunday.

Schaeffer’s critics are angry about his handling of the failed merger and also say he has not always kept them informed of key events. In addition, some consider it a conflict of interest that Schaeffer continues to run both Blue Cross of California and for-profit WellPoint. But Schaeffer is regarded as one of the managed care industry’s top executives, and the dissident board members apparently thought better of an overt challenge at the Sunday meeting.