When Eric Galvin takes over as president and CEO of ConnectiCare on Feb. 1, he will be overseeing a company that in November announced it was on pace to lose $55.4 million in 2016.
It”™s also the same company that for a time played a game of will-we-or-won”™t-we when it came to remaining on the state”™s health insurance exchange, Access Health CT.
And the reason for Galvin”™s rise to the top came on Jan. 12 when Michael Wise suddenly resigned without explanation after six-plus years at the helm and five years prior as its executive vice president and chief financial officer.
“We absolutely had some bumps in the road last year,” Galvin said from ConnectiCare”™s headquarters in Farmington in an interview with the Business Journal. “But I feel much better about our prospects this year.”
Galvin joined ConnectiCare as its senior vice president and chief financial officer in June 2015 after leaving Blue Cross Blue Shield. Prior to that he spent some 14 years at Cigna, where he first encountered Wise.
“I was recruited to ConnectiCare by Michael,” Galvin said. “He has a brilliant business mind. He”™s the rare person who has both an incredible personality and a set of values that are second to none.”
“We have Michael Wise to thank for this,” Karen Ignagni, CEO of EmblemHealth, which acquired ConnectiCare in 2005, said in discussing Galvin”™s promotion. “He recruited Eric with the idea that he would be his successor.”
As for Wise”™s seemingly sudden exit ”“ he has made no public comment since the announcement of his resignation, which likewise was absent a statement from him ”“ Ignagni said, “Michael felt it was a good time now to make this decision. He has been very, very focused on making sure the leadership transition would be as seamless as possible.”
Still, the Access Health brouhaha was hardly seamless, and there have been rumors that it was at the root of Wise”™s departure. ConnectiCare filed three different rate proposals with the Connecticut Insurance Department last year, the second of which ”“ for an average rate increase of 17.4 percent ”“ was approved.
But ConnectiCare indicated it wanted to stay with its third proposal ”“ for a 27.1 percent increase ”“ and sought a court injunction to invalidate the Insurance Department”™s decision; that motion was denied by a Superior Court judge in New Britain on Sept. 9.
That same day, ConnectiCare sent a letter to Access Health CT saying it was terminating its agreement. Although Access Health CT announced its receipt of the letter and seemed to acquiesce to the termination, Wise insisted the company was still “actively working” to find a mutually acceptable arrangement allowing it to remain on the exchange. In the late afternoon of Sept. 13, Wise released another statement announcing that the insurer would remain with Access Health with the 17.4 percent increase. The company also withdrew its legal appeals and rescinded its termination letter.
The resolution was doubtless a relief to Access Health CT, which had already lost two of its four insurance providers, UnitedHealthcare and Healthy CT, during the year. If ConnectiCare had left, only Anthem would have remained heading into 2017.
At the end of Access Health CT”™s 2016 open enrollment period, ConnectiCare had 53 percent of the exchange”™s market share; as of summer of last year, there were roughly 47,600 Access Health CT customers with ConnectiCare coverage. Figures for the current enrollment period, which ends Jan. 31, are not yet available.
It was during the Insurance Department showdown that ConnectiCare revealed its looming 2016 deficit, which if it holds true ”“ the company”™s financial results are due to be filed with the department on March 1 ”“ would represent its worst annual financial performance since being acquired by EmblemHealth 12 years ago.
Those projected losses were not due to being a part of Access Health CT, Galvin said, but to higher-than-expected use of health care services by customers. Such an error will not happen again this year, he said.
“The accelerated pace of (services) consumption took place at levels I”™d never seen in my career,” he said. “That”™s what drove our financial losses.
“Our main focus now is getting to know our customers better,” he continued. “We have collected a lot of data over our 35 years (ConnectiCare was founded in 1981), so we need to go back and see what we know about each of our customers from our previous interactions, as well as reaching out to established and newer customers to understand their preferences when it comes to their health care.”
Ignagni said she endorses Galvin”™s strategy of refocusing on customers. “There”™s a great opportunity for our team in Connecticut to get to know our customers better,” she said. “We need to work with them and with clinicians and hospitals to manage their conditions, especially chronic conditions, more effectively.”
The fact that Galvin is a Connecticut native ”“ he attended Holy Cross High School in Waterbury and graduated from UConn”™s School of Business ”“ also played an important part in the decision to hand him ConnectiCare”™s reins, she said.
“Not only does he know the team and established himself as a respected leader, but he has Connecticut experience,” Ignagni said. “I grew up in Rhode Island, and I understand the importance that growing up in a smaller state can have in understanding that state”™s customers.”
“I grew up wanting to be in the business of helping the community I live in,” Galvin said, “and in the insurance business that extends to helping our customers. I”™m excited to be leading that charge. I”™ve prepared my entire career for a role like this.”
When the conversation turned inevitably to the future of the Affordable Care Act, or Obamacare, both executives took a wait-and-see attitude.
“It”™s still too early to speculate,” Galvin said. “There are a number of different proposed solutions, but not enough clarity to prognosticate.”
Internally, he said, ConnectiCare has looked at a number of potential scenarios involving elements of the ACA that have the most significant impact on the insurer”™s customers and business. “We”™ve undertaken some pretty thoughtful planning about what to do if a particular element or another is replaced,” Galvin said.
In the interim, he pledged that “We will continue to be committed to being on the exchange,” he said. “Our commitment to our customers and to the state are of great importance to us.”
As he prepares to take over running the company on Feb. 1, Galvin said he has high hopes for the future.
“This is a highly volatile industry,” he said. “But with that volatility comes a lot of opportunity.
“This company is an absolute gem,” he declared. “We will flourish despite all the tumult.”
Access Health is going to hurt Connecticare’s chance to turn around it’s earnings. Why stay when the Insurance Commissioner has made it impossible to even break even.
I don’t see the rational.
And why, then, did Connecticare whack all of its clients that were not on the exchange with 35-60% rate increases?