WellPoint gets double blow as it faces investigation, tosses CFO

The health plan fired its face to Wall Street over personal conduct issues and discovered California is looking into dividend payments.

By Pamela Lewis Dolan, AMNews staff. June 25, 2007.

WellPoint's new CEO took over on June 1 -- and inherited two large headaches.

The first was word in late May from California state regulators that they are investigating a $950 million divided payment WellPoint-owned Blue Cross of California made back to the home office in Indianapolis. The California Dept. of Managed Care says it is looking into whether the size of that payment violated the merger agreement WellPoint signed with the department when it acquired Blue Cross in 2003.

The second, coming within a week of the announcement about the investigation, was the forced resignation of WellPoint's chief financial officer for unspecified violations of the company's personal conduct policy. An internal investigation led to the departure of David Colby, who was WellPoint's most public face on Wall Street, and was expected to keep investors happy while new CEO Angela Braly got up to speed.

Braly replaced Larry Glasscock, who retired after building Anthem from a Midwest-focused mutual insurer to one of the two most powerful for-profit health plans (along with United HealthGroup) in the nation. Braly formerly was WellPoint's executive vice president, general counsel and chief public affairs officer.

The California Medical Assn. says WellPoint's first headache actually is more hurtful to physicians and patients. The association testified against the WellPoint-Blue Cross merger when it was proposed.

"One of our chief concerns then, and still is, the continuing pattern of Blue Cross/WellPoint putting profits before patients," said CMA spokeswoman Karen Nikos. "This dividend situation reported in the media is yet another example of their patient-unfriendly business practices."