Health Plan Leadership: Executives with Private and Public Experience Wanted

After years of consolidation amongst private commercial health plans, large insurers like Aetna and WellPoint recently shifted their gaze toward the public realm. With Medicare and Medicaid expansion impending and millions more people gaining health insurance, private insurers have targeted federal health programs and managed-care businesses with significant Medicare and Medicaid components.

The mergers and acquisitions have blurred the lines between what were previously very distinct worlds, creating leadership challenges for both public and private health plans, says Mark Andrew, Witt/Kieffer senior vice president. Executives for large, private insurers are venturing deeper into government-sponsored business and trying to understand how to better manage government programs. In response, they must either be quick studies or surround themselves with executives who have experience in the public sector and understand the uniqueness of the regulatory environment and funding streams for the government-sponsored programs.

Meanwhile, says Andrew, executives in charge of government plans will need to adapt as well, moving beyond their traditional roles as public policy experts and lobbyists of state legislatures to become more savvy business operators. They may also need to get comfortable with a more corporate business culture should they affiliate with a private insurer.

From his Irvine, California office, Andrew has a unique window on all this activity, having conducted executive searches for both public and private insurers over many years. I spoke with him about today’s health plan leadership changes and challenges.

What’s going on out there in terms of consolidation?

Mark Andrew

Mark Andrew

Andrew: Many of the big insurers—WellPoint, Aetna, and UnitedHealthcare—are looking to diversify and moving more aggressively into the Medicaid space. That’s where they see opportunity now. Some estimate that Medicaid spending in managed-care plans will increase by nearly $100 billion by the end of 2014. The large commercial insurers are deciding that they are either going to build that capability or acquire it in order to play in that space. Many of them are choosing to acquire it because it’s the easier and quicker solution.

What are the health plan leadership implications—first, for public plans?

Andrew: CEOs of public Medicaid plans historically have not had to manage a lot of risk, if you will. They may have had large memberships, but their primary role was to manage that population—not to grow it strategically as a private-sector CEO must do. But now these plans have begun focusing more on “dual eligibles,” seniors who are eligible for both Medicare and Medicaid and are generally very high utilizers of healthcare dollars because they often have multiple chronic conditions. Also, some state Medicaid agencies are getting involved in bundled payment initiatives as an alternative to fee-for-service.

So CEOs and executives of these public plans are having to become much more disciplined in how they manage their businesses and control their costs. Boards are now looking for people who can help strategically position the organization to look more like commercial insurers and build the robust infrastructure to manage risk with more diverse populations of Medicare Advantage or Special Needs Plans.

The position profile of a recent public plan CEO search I conducted, for example, stated that the new leader must “conduct a thorough analysis of new sources of revenue and implement viable expansion products.” This is fairly typical nowadays and signals a major shift in leadership philosophy.

These organizations are taking on more risk and, as a result, are starting to look in the commercial space for their leadership needs. Instead of looking primarily to people with experience in Sacramento or Washington, D.C., they’re looking for executives who are proven business operators. So there is a blurring of those lines between the skills and responsibilities of a Medicaid plan CEO and a commercial plan CEO.

And what about commercial plans—are they heavily recruiting executives who have traditionally been in the public realm?

Andrew: I think we are just starting to see it. Some of the commercial plans may be a little reluctant to pluck somebody out of one of the Medicaid plans for top leadership positions. But as big commercial plans are acquiring or building their Medicaid portfolio, they are recruiting more executives who already understand the nuances of Medicaid managed care and integrating them into their business model.

I would imagine that there is short supply of these hybrid-type leaders to go around?

Andrew: Yes, because it’s not an easy transition in either direction. Organizations on both sides—Medicare/Medicaid and the commercial insurers—are looking for executives with experience in both camps, and people who have that experience are already being heavily recruited and finding good positions. So there is going to be more competition for the talent that is out there that understands both environments.

As an executive recruiter, how do you identify candidates, even those later in their careers, who can adapt and learn the finer points of a different sector?

Andrew: Experience is key, of course. We’ve placed a lot of candidates in challenging leadership situations and have developed a pretty good sense of which individuals can handle new and significantly different roles. More importantly, however, we use our leadership competency assessment tools to gauge a candidate’s ability to succeed in different organizational cultures, under different types of stressors, and when presented with new challenges. Our competency modeling and in-depth assessment interviews give clients pretty comprehensive evidence to support instincts when identifying and hiring executives.

Given the shake-up in the industry, how important is it for a health plan to really understand its leadership team and to know what its strengths and weaknesses are?

Andrew: It’s more important than ever. Top executives need to develop their own skills, of course, but also surround themselves with people who can drive results and provide business discipline and rigor while being able to build consensus around a vision and still work effectively with legislators and regulators. Health plans are looking for people who are comfortable with both sectors, and this need is only going to grow.

By Paul Thomas, Witt/Kieffer Senior Writer (@PaulWThomas)

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