Once a competitor, now a leader at UnitedHealth

Gail Boudreaux has competed against UnitedHealth her whole career.

She watched America's biggest health insurer swallow up small health plans from California to New York, gaining a reputation for big ambitions and sharp elbows. A former basketball player, she knows about sharp elbows.

So when UnitedHealth called on Boudreaux, then at Blue Cross and Blue Shield, to help turn around its $40 billion commercial insurance business last spring, she said yes.

"I think I can make a difference," she said. "I'm a competitive person."

She's got her work cut out for her. Over the past decade, the Minnetonka-based insurer grew too big, too fast. It developed a national network of doctors and hospitals, an information technology system with bells and whistles, and even its own bank.

But years of rapid growth created problems handling claims and a reputation for arrogance. A stock scandal that led to the ouster of longtime chief William McGuire didn't help. For an outraged public, the company came to symbolize what was wrong with health care.

The result: Customers started going elsewhere.

The challenges have grown even harder in an uncertain economy: Last week UnitedHealth Group Inc. reported a sharp drop in third-quarter earnings.

"Trying to steer a broken ship safely, and grow, in the seas we have now is very, very difficult," said Sheryl Skolnick, senior vice president of CRT Capital Group in Stamford, Conn. "She's going to have to run that business perfectly."

Growth pains

If Boudreaux had qualms about joining at a time of turmoil, she's not saying. "Would I have preferred not to come in the midst of an earnings downgrade? Absolutely," she said in an interview. But she added: "I saw an incredible opportunity. I wasn't looking behind."

UnitedHealth didn't want to look back either. Once a Wall Street darling, the company was struggling to stitch together its many acquisitions. A hodgepodge of computer systems hampered its most basic functions -- paying claims accurately and punctually.

Janet Sherry, assistant vice president at Bolton & Co., a Pasadena benefits consultant, remembers the problems after UnitedHealth's 2005 merger with PacifiCare, a big California health plan. In one instance, a member who was hospitalized saw six of 12 claims processed incorrectly. Another time, an employer, panicked by headlines of a $3.5 million fine that California slapped on PacifiCare for claims problems, asked to be moved to a different insurer.

"UnitedHealth is so big you feel like you can get lost in the shuffle," Sherry said.

The insurer also had a reputation for inflexibility.

"They were trying so hard to standardize everything," said Dave Delahanty, a benefits consultant with Watson Wyatt in Minneapolis. "Customers want flexibility and services customized. It wasn't working."

Those problems took their toll. Even as UnitedHealth's government business was expanding, its commercial business -- which makes up $40 billion of some $75 billion in total revenues -- was shrinking.

Twice this year, the company lowered profit goals. In 2008 alone, it expects to lose 700,000 commercial members.

In May, Chief Executive Stephen Hemsley hired Boudreaux with an assignment to stem the losses. He said she brought leadership qualities, energy and a deep knowledge of the industry. "She also understands the critical importance of managing local market dynamics," Hemsley said.

Boudreaux, 48, had cut her teeth at Aetna Inc. before going to Blue Cross.

Even before that, she had shown an appetite for hard work. A native of Chicopee, Mass., she arrived at Dartmouth College in New Hampshire with an athletic reputation that drew other players to spy on her practices even before basketball season started. In practice, "We'd run until we were ready to throw up," said Corrine Heyes, Boudreaux's co-captain.

On court, Boudreaux was not known for beautiful finger rolls or fancy moves. She was, said Heyes, "a banger. She was elbowing, getting elbowed, getting smashed and smashing back."

But she also had a softer side: playing big sister to freshmen and checking in to see if they were homesick.

When she joined Aetna in Hartford, Conn., as a management trainee, she figured insurance "is as interesting as anything else." She threw herself into work, carting stacks of financial documents with her even to the poolside at her apartment.

Learning the blues

Boudreaux, who stands 6-foot-2, still moves with the grace of an athlete. She rose through the ranks at Aetna, moving her family seven times. Her husband, Terry Boudreaux, is a noted collector of fossils and meteorites, and their children spent last summer on a dinosaur dig in Montana.

In 2002, when her sons were in kindergarten and fourth grade, she left Aetna to join Blue Cross and Blue Shield of Illinois so the family could stay in one place for a while.

Blue Cross, made up of 39 independent, locally managed health plans, was as local as Aetna was national. In Illinois its roots went back to the Great Depression, when Chicago business leaders pooled their savings to start a nonprofit health plan to help the poor get medical care.

"The Blues are very politically and philanthropically oriented," Boudreaux said. She joined the boards of Chicago's Field Museum and Metropolitan Planning Council.

She also learned how to nurture local business ties. When the local market is your only market, "you manage relationships with brokers, physicians, customers in a much more intimate way," she said.

By the time UnitedHealth came calling, she was overseeing four states for Blue Cross.

Local touch

At UnitedHealth, the fix was to repair frayed ties -- with doctors, hospitals, members, employers and brokers -- and to relearn the idiosyncrasies of local markets.

"What works in Chicago does not necessarily work in south Florida," Boudreaux said.

For example, after listening to local brokers and others on the ground, she rolled out a new health plan called "Simply Engaged" in just 14 markets instead of nationwide. Aimed at small and medium-sized businesses, it is a high-deductible plan with a health savings account and incentives for staying healthy.

"The No. 1 place it sells is Florida, where there is huge focus on healthy lifestyles," said Boudreaux. In California, where most employers still prefer HMO products, "Simply Engaged" is not sold.

Looking ahead

None of this will be quick or easy. In California, ties with physicians continue to be strained. Since the 2005 PacificCare merger, the California Medical Association has had more complaints from physicians about UnitedHealth than about any other payer.

Others say they see some improvement.

Bolton & Company's Sherry says complaints about UnitedHealth have fallen in recent months.

"More of us are starting to feel comfortable recommending UnitedHealth again," she said. "For a while, we were apprehensive."

A survey this year of large, self-insured employers by Citi Investment Research placed UnitedHealth in first place ahead of CIGNA, Wellpoint and Aetna on key satisfaction measures.

Still, "the challenges are pretty dramatic," said Charles Haff, an analyst at Thrivent Asset Management in Minneapolis. "2009 may be a little too early. In 2010, we expect them to be back in full force."

Chen May Yee • 612-673-7434