Highmark CEO Winkenwerder out after less than 2 years

| Wednesday, May 21, 2014, 9:36 a.m.

Highmark Inc. replaced its CEO on Wednesday, saying it wants to speed its transformation from a traditional health insurer to a consumer-focused and integrated health care company.

The state's largest health insurer announced the abrupt departure of William Winkenwerder less than two years after he joined the nonprofit. David Holmberg, a Highmark executive, will succeed him.

Holmberg, 55, was president of Highmark's diversified businesses, which include vision, dental and stop-loss insurance companies, and has spent much of his career in the retail industry. The San Antonio-based division posted $3.5 billion in revenue last year, about a quarter of Highmark's $14.9 billion in total revenue.

“This is a time of significant change across the health care marketplace, and David will be the right leader at the right time to accelerate the transformation of our organization,” Chairman J. Robert Baum said in a written statement.

Neither Winkenwerder nor Holmberg, who will relocate from Texas to Pittsburgh, was available for comment, spokesman David Carter said.

Baum could not be reached.

Winkenwerder, a former assistant secretary in the Department of Defense and an insurance executive, joined Highmark in July 2012 and was viewed as a steadying influence for an organization reeling from a scandal involving its previous CEO, growing uncertainty over whether it would close a complex deal to acquire a struggling hospital system and an increasingly bitter contract fight with rival UPMC.

“He came in at a difficult time,” Carter said.

Twenty-two months later, Highmark is still fighting with UPMC over a reimbursement contract, but it completed the more than $1 billion acquisition of West Penn Allegheny Health System, which it combined with two other hospitals to form Allegheny Health Network.

The system is making progress on a financial turnaround.

“During his tenure, Highmark Health became an integrated health care delivery system by creating the Allegheny Health Network. We thank him for his dedicated service,” Baum said of Winkenwerder in the statement.

Highmark's health insurance division, despite discounting premiums to retain employer-group customers, was among the most successful insurers that sold individual plans through online marketplaces established by the Affordable Care Act.

The company signed up 131,000 people through Healthcare.gov, about 40 percent of the state's total.

Carter said Winkenwerder's departure was not related to his inability to secure a contract with UPMC. When the contract expires at the end of this year, most of UPMC's hospitals and doctors will be out-of-network to Highmark insurance subscribers.

Winkenwerder was paid $4.3 million last year. Carter was unable to provide details of Winkenwerder's severance package.

Holmberg, paid $1.6 million last year, was appointed CEO by Highmark's board of directors at a meeting on Tuesday night. The board selected him for his experience meeting consumer demands.

Before joining Highmark in 2007, Holmberg was executive vice president of operations for Jo-Ann Stores Inc. and held executive positions with Cole Licensed Brands and Zales Corp.

Carter said Holmberg has a “skill set that this company needs,” including his experience building Highmark's Visionworks retail eyeglass business and Davis Vision insurance subsidiary into large and profitable enterprises.

“Health care is moving in a direction where consumers are taking control of the health care spend,” he said.

Former CEO Ken Melani, fired in April 2012 after getting into a fistfight with the husband of his mistress, hired Holmberg and praised Highmark's decision to elevate him to CEO.

“He developed one of the largest integrated vision companies in the world,” Melani said. “I know that the employees will rally around Dave.”

Melani said Holmberg lacks experience on the medical side of Highmark's business but is a “fast learner” with a “great team around him.”

Paul Fronstin, a senior research associate with the Employee Benefit Research Institute in Washington, said health insurers and health care companies are reaching out to leaders in other industries to take what they've done to engage consumers.

“The health care industry is trying to find those types of people so we can apply what's happening in other industries to health care,” Fronstin said. Although insurance companies are giving consumers more tools and resources to make health care decisions, it's uncertain if the approach will work, he said.

“There's going to be a lot of experimentation. There's going to be a lot of trial and error because it's so new,” he said.

Luis Fábregas and Alex Nixon are Trib Total Media staff writers. Reach Fábregas at 412-320-7998 or lfabregas@tribweb.com and Nixon at 412-320-7928 or anixon@tribweb.com.

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