Patricia Hemingway Hall, president and CEO of Health Care Service Corp., will retire at the end of the year. She has led HCSC, the Blue Cross and Blue Shield insurer for five states, since 2008, and has been with the behemoth for 23 years.
HCSC named Paula Steiner as president, effective immediately, and as the next CEO starting Jan. 1. Steiner, 58, HCSC's chief strategy officer, has been with the organization since 1997, and will be tasked with leading the insurer through an era of increased consolidation and changing business models.
Hemingway Hall, 62, has been considered one of the most powerful people in the healthcare industry because of the size and influence of Chicago-based HCSC. It is the largest not-for-profit health insurer in the country, selling Blue Cross and Blue Shield plans in Illinois and Texas, as well as Montana, New Mexico and Oklahoma. Hemingway Hall, a former nurse, previously was the CEO of the Texas Blues brand.
“All of us at HCSC have made history in changing America's healthcare system and improving the lives of millions,” Hemingway Hall said in a statement. “During my tenure, we have made significant investments in our future, and we remain well-positioned to continue expanding access for coverage for as many people as possible in our states.”
Hemingway Hall was not available for an interview Thursday.
Nationally, she has caught the attention of policymakers. The Obama administration called on Hemingway Hall and 13 other health-insurance industry heavyweights in October of 2013 to help fix the bungled rollout of the federal exchange website, HealthCare.gov.
Under her leadership, HCSC was also one of the founding members of the Health Care Transformation Task Force, a private-sector coalition of providers, insurers, employers and patients that launched this year. The group's members have made a commitment to tie 75% of their business to contracts that move the healthcare system toward a model that rewards better outcomes and lower costs, and moves it away from the current system model that simply pays for every service.
Similar to other Blue Cross and Blue Shield licensees across the country, HCSC predominantly provides health insurance for employers. The company offers full-risk plans, as well as administrative contracts for larger self-insured employers. Hemingway Hall led HCSC's foray into the public insurance exchanges created by the Affordable Care Act and rolled out in 2014.
But the first year of the exchanges did not go well. HCSC lost $282 million overall last year largely because of its exchange membership. The company's Texas subsidiary lost almost $400 million on individual policies in 2014, while the Illinois Blues lost $280 million in the same market. Hospital and medical claims greatly outpaced premium revenue.
Overall, HCSC's membership grew to about 16 million Americans during Hemingway Hall's tenure. She oversaw the acquisition of the Montana Blues plan in 2013, as well as other smaller deals. But Hemingway Hall has been criticized for her large paychecks, which have been comparable to her for-profit peers. She made $16 million in total compensation in 2012 and $11.2 million in 2013.
When Steiner takes over next year, HCSC could be sitting in a commercial market dominated by three insurers. Aetna and Anthem expect to close on their acquisitions of Humana and Cigna Corp., respectively, later next year. Each company will see about $115 billion in annual revenue, trailing industry leader UnitedHealth Group, which has about $154 billion in projected revenue for the year.
HCSC had $28 billion in revenue in 2014, putting it well behind the other three insurance titans. It would also be trailing Centene Corp., which will have about $37 billion in revenue if its acquisition of Health Net goes through.
But not-for-profit Blue Cross and Blue Shield carriers such as HCSC still wield considerable power in their respective markets, analysts say. Their brand names attract employers and individual consumers, which makes them essential payers for hospitals, doctors and other providers.
“I think for these large single-state players, it's going to take awhile before they are unseated because of how local a lot of healthcare is,” said Stuart Gunn, a managing director at financial services firm Houlihan Lokey. Gunn added that HCSC could become an “Anthem Jr.” if it picks up more state Blues plans. Anthem is the largest licensee of the Blue Cross and Blue Shield Association.