Jews to step down as CareFirst CEO

November 03, 2006|By M. William Salganik | M. William Salganik,Sun reporter

William L. Jews, who transformed Maryland's teetering Blues plan into a prosperous regional insurer and then ignited fierce controversy when he tried to sell it, will step down as chief executive of CareFirst BlueCross BlueShield at the end of the year.

Michael R. Merson, chairman of CareFirst's board, said yesterday that Jews' departure was a "mutual decision" as the state's largest health insurer prepares for a new phase that will be more technologically driven.

"It was an ideal time for Bill to achieve his personal objectives and for the company to engage in a search for an executive who has the requisite skills" for the future, he said. "There are times an organization can be advanced by someone with a different skill set."

Jews was not available to comment, the company said. Merson said Jews, 54, was "certainly not retiring" and would be pursuing other business opportunities.

Jews became a lightning rod for criticism when he attempted to convert CareFirst to a for-profit operation in 2001 and sell it for $1.3 billion - a deal that would have generated $39 million in bonuses, deferred compensation and other payments for Jews.

Merson said Jews would receive "substantial" deferred compensation and retirement benefits under his employment contract but the amount hadn't been computed. In reviewing the 2001 deal, a consultant for the state estimated that Jews would receive more than $11 million in deferred compensation and retirement benefits if he left the company then, apart from any deal bonuses or "change-of-control" payment.

Insurance Commissioner R. Steven Orr said yesterday that he would review terms of any severance agreement "to ensure its compliance with Maryland law and to protect the assets and financial viability of the company."

Jews was paid $1.1 million in salary and $1.4 million in "incentive compensation" last year, according to a CareFirst filing with the Maryland Insurance Administration.

Jews, who had become a hospital CEO before he was 30, came to what was then Blue Cross and Blue Shield of Maryland in early 1993 after its chief executive resigned amid charges of mismanagement and lavish spending. The company's reserves had shrunk to $24.9 million, just 13 percent of the guidelines for an insurer that size.

Jews restored it to fiscal health and engineered the mergers that created CareFirst in 1998. Its membership more than doubled during his tenure, and its reserves are now about $1 billion.

"I think, but for the controversy with the sale, he would have been viewed as having an impressive career. He accomplished a lot," Steven B. Larsen, who blocked the sale in 2003 when he was state insurance commissioner, said yesterday. Larsen is CEO of Amerigroup Maryland, the local subsidiary of a Medicaid HMO.

Maryland House Speaker Michael E. Busch said yesterday that Jews enjoyed a good relationship with legislators during the 1998 deal.

That changed abruptly when he tried to convert the company to a for-profit and sell it to a California insurance giant, a deal Busch said was viewed as "basically beneficial to executives of companies and not to the citizens who were underwriting its nonprofit status."

After months of controversy, Larsen blocked the sale in 2003, writing that there was "substantial and credible evidence" that the deal was "inappropriately influenced by the prospect of large payouts for some individuals."

The General Assembly quickly stepped in, passing legislation that locked in CareFirst's s nonprofit status for five years and replaced a majority of its board members. Merson, a hospital executive and consultant, was among the new members nominated by a state-appointed committee, and he became chairman of the revamped board.

Jews survived the uproar, and since then the company has reduced its profit margin, held the line on premium increases for some products and stepped up its contributions to health-related efforts in the community, winning the praise of some observers.

"Since the buyout option was closed out, the legislature gave the company a clear message, and the company responded and moved forward," said Del. Shane E. Pendergrass, a Howard County Democrat who was an author of the reform legislation. Busch, too, said he was satisfied with the company's actions since then.

CareFirst, with headquarters in Owings Mills, has nearly 3 million members in Maryland, the District of Columbia and Northern Virginia. Revenue last year was $5.4 billion. The company has more than 5,400 employees.

David D. Wolf, executive vice president and long a trusted lieutenant to Jews, was named interim CEO while the board conducts a search for his replacement. Wolf, 56, joined the company in 1991, when Blue Cross and Blue Shield of Maryland bought an HMO of which he was president.

Merson said the board would meet this month to form a search committee and set guidelines for finding a new CEO. He said Wolf and other current executives "could be considered if they choose to apply."

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