Blue Shield of California CEO to retire

Blue Shield of California’s longtime chairman and chief executive, Bruce Bodaken, will retire at year’s end, punctuating a career marked by praise for his early support of universal health coverage and criticism of his company’s repeated rate hikes.

Bodaken, 60, will leave at the end of December, and Paul Markovich, 45, currently chief operating officer at the nonprofit health insurer, will take over as CEO. The San Francisco company’s 10-member board will elect a new, independent chairman this year.

Bodaken had been chairman and CEO since 2000 and had worked there since 1994. “I’m very proud of what the organization has accomplished over the last 18 years,” Bodaken said in an interview. “I am very gratified to see the progress that has been made on health reform, and we hope the Supreme Court will leave the law as is.”

Breaking with other insurance executives, Bodaken supported universal health coverage as early as 2002 and later backed former Gov. Arnold Schwarzenegger’s effort to expand coverage to all Californians. That approach was later championed by President Obama in his 2010 Affordable Care Act, which Blue Shield supported.

“Bruce has been a formidable competitor and a good ally at the same time,” said George Halvorson, chairman and CEO of Kaiser Permanente, the nation’s largest nonprofit health plan and hospital system.

Halvorson said many Blue Shield insurers in other states had struggled, but Bodaken built a strong company in California. “He has managed to hold his own and grow market share,” Halvorson said.

But critics said Bodaken did so, in part, by imposing hefty premium increases on consumers and amassing significant reserves far beyond what regulators require. Blue Shield, the state’s third-largest health insurer with 3.3 million customers, reported reserves of $3.77 billion for the first quarter, which ended March 31.

“Bodaken was the poster child for why we need health insurance rate regulation,” said Jamie Court, president of Consumer Watchdog. Court’s Santa Monica group is campaigning for a November ballot measure to give the California insurance commissioner more authority over rate hikes.

Rep. Jackie Speier (D-San Francisco) disagreed with that characterization of Bodaken and said he “always put the healthcare of patients first, and that is not the case for most health insurance CEOs.”

In response to the outcry over its rates, Bodaken announced last year that the company would issue credits to customers if its net income exceeded 2% of revenue. As a result, the company said, it returned about $475 million to individual policyholders last year, which reduced members’ rates about 7%. “I think that shows we are serious about making things as affordable as possible,” Bodaken said.

In the first quarter, Blue Shield reported revenue of $2.5 billion and a profit of $138 million. It posted annual revenue of $9.53 billion last year.

The company disclosed Bodaken’s salary for the first time last year to comply with a new state law designed to better examine premium increases. He earned $4.6 million in 2010, but the company hasn’t updated that figure for 2011 in state rate filings. The company declined to comment on the value of Bodaken’s retirement package.

Markovich, a North Dakota native who was a Rhodes scholar, has spent 14 years at the company. Before joining Blue Shield, he served as a management consultant for Booz Allen and Hamilton in New York.

Bodaken said he and the board had discussed his retirement for a few years and agreed this was a good time to promote Markovich so he could prepare for 2014, when most of the federal healthcare law kicks in. Bodaken said he planned to teach university courses, continue serving on other boards and work on his tennis game.

Consumer advocates had mixed reviews about Bodaken’s tenure at Blue Shield. They lauded his support for expanding and improving the quality of insurance coverage, but they also noted that Blue Shield was among the most aggressive companies at improperly rescinding customers’ health policies a few years ago.

“They were both a supporter of health reform and an example of why it was necessary,” said Anthony Wright, executive director of Health Access, a consumer advocacy group.

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