(Story updated at 3 p.m. ET.)
Karen Ignagni, the longtime head of America's Health Insurance Plans, is leaving the industry's powerful lobbying group to become president and CEO of EmblemHealth, a financially troubled insurer based in New York.
She will replace Frank Branchini, effective Sept. 1. Branchini has been with EmblemHealth and its predecessor companies for 30 years and will stay on as chair of the insurance company's board of directors.
Ipsita Smolinski, managing director of Washington-based healthcare consulting firm Capitol Street, said Ignagni's departure from AHIP was “a shock” to the health policy community in Washington. “It seems everyone was caught off-guard,” she said.
Dan Durham, AHIP's executive vice president, will serve as the lobbying group's interim CEO. Speculation has swirled that a former member of Congress could take Ignagni's place.
Ignagni, who made $2.03 million in 2013, is the third major trade association CEO to announce plans to leave this year. American Hospital Association CEO Richard Umbdenstock is retiring at the end of 2015, with Rick Pollack taking his place. Pharmaceutical Testing and Manufacturers of America CEO John Castellani also is retiring.
During Ignagni's 22-year tenure at AHIP, she became one of the most influential lobbyists in the country and has been synonymous with the often-controversial health insurance industry. She led the merger between the American Association of Health Plans and the Health Insurance Association of America, which ultimately became AHIP.
More than 200 health insurance companies are members of AHIP, including Aetna, Anthem, Blue Cross and Blue Shield plans, Cigna Corp., EmblemHealth, Humana, UnitedHealth Group and numerous provider-owned plans.
During the drafting stages of the Affordable Care Act, Ignagni and AHIP had a prominent seat at the negotiating table. But the law sought to reform many industry norms. The law requires all health insurers to offer coverage to people regardless of pre-existing medical conditions and mandated several preventive healthcare services be covered by insurance companies with no cost-sharing for members. Medical-loss ratios capped insurer profits.
Although those provisions meant less power and money for health insurers, the industry won several major provisions. The ACA created several risk-adjustment programs to reimburse companies for taking on a sicker population. The law also included the individual mandate, forcing most Americans to buy private health insurance or face a tax penalty.
Ignagni, 61, supported the individual mandate, which was upheld by the U.S. Supreme Court in 2012. She said it allows risk to be spread among all people. “Without a participation requirement, the market reforms don't work,” she said during a . “We know that.”
The ACA also instituted cuts to the Medicare Advantage program—cuts that Ignagni and AHIP have heavily criticized. Medicare Advantage is the managed-care alternative to traditional fee-for-service Medicare.
The CMS has enforced the mandated payment reductions every year since 2010. Ignagni has said the rate cuts lead to higher premiums and fewer benefits for seniors, but data suggest that argument holds little weight. Also, Medicare Advantage enrollment has grown by more than 8% annually despite the payment reductions.
This past April, the CMS boosted Medicare Advantage rates for 2016. “The final rate notice took a notable step to provide stable funding for the Medicare Advantage program,” . “However, the lack of action to address policy concerns around providing care for the chronically ill and vulnerable populations could undermine health plans' efforts to address the needs of these beneficiaries.”
Regarding EmblemHealth, Ignagni said in a statement that she is “honored to join this unique not-for-profit health plan at such an important time.” It will be her first job leading a health insurer.
EmblemHealth provides health coverage to 3.2 million people. It operates through two primary subsidiaries: Group Health and Health Insurance Plan of Greater New York.
The company suffered massive losses last year, according to annual reports filed with the National Association of Insurance Commissioners. Health Insurance Plan of Greater New York lost more than $365 million on $5.1 billion of revenue. Group Health lost almost $129 million on $1.9 billion of revenue. Hospital and other medical benefits dug heavily into revenue from premiums.
Other executives and observers have praised the work Ignagni has done. “As the voice of our industry, she has worked tirelessly on our behalf with acumen that is unmatched,” said Mark Ganz, AHIP's board chair and CEO of Cambia Health Solutions.
“She's a hard worker and knows the issues relevant to not just health insurance—exchanges, Medicaid, private pay, Medicare Advantage—but healthcare systems and policy overall,” Smolinski said.