ETHS to Approve $7 Million Donation from Former WellPoint CEO

Healthcare company accused of denying claims for breast cancer patients while donor was CEO and Chairman

In Monday’s ETHS Board Meeting, the Board will vote to approve a $7 million dollar donation from Leonard Schaeffer. You can read the Evanston Now story or the memo;

As part of the campaign, several high value spaces were identified as recognition opportunities for donors supporting our fundraising aspirations. Alumnus Leonard Schaeffer (‘63) was engaged by Foundation staff as part of this fundraising effort and solicited for a $7 million dollar gift to be recognized by the naming of the Auditorium in his honor, contingent upon acceptance by the District 202 School Board. The ETHS Foundation, ETHS leadership, and the donor tentatively agreed upon terms of this transformational lead gift to the campaign on October 30, 2024 through a signed gift agreement.

This is part of a broader $48 million dollar fundraising goal for the new arts and innovation wing of the school.

As a result, a 5-year fundraising campaign goal of $48 million dollars was established to support the Capital Improvement Plan (CIP) for the Arts & Innovation wing of the school.

Mr. Schaeffer and his wife are philanthropists, having donated $59 million in April 2024 to fund a new institute at the University of Southern California. The Schaeffer family money comes from the healthcare business. According to his own bio;

In 1986, Schaeffer was recruited as CEO to WellPoint’s predecessor company, Blue Cross of California, when it was near bankruptcy. He managed its turnaround and the IPO creating WellPoint in 1993.

WellPoint (now called Elevance Health) spun out from Blue Cross of California, converted to a for-profit firm and IPO’ed in 1993. Mr. Schaeffer was the CEO until 2004 and the Chairman until 2005.

Put aside the inevitable rant I have about why this is another reason to consolidate school districts in Evanston.¹ Let’s talk about WellPoint’s moment in the sun.

WellPoint’s Greatest Hit: Recission

Rollback the clock to 2010, the first Obama term. Kathleen Sebelius, the head of HHS at that time wrote a letter to WellPoint’s CEO (not Mr. Schaeffer). In this letter she expresses displeasure at reports of WellPoint specifically retroactively terminating coverage for women with breast cancer;

I was surprised and disappointed to read media accounts indicating that WellPoint routinely rescinds health insurance coverage from women recently diagnosed with breast cancer. Today’s report from Reuters indicating that your company “has specifically targeted women with breast cancer for aggressive investigation with the intent to cancel their policies” is disturbing, and this practice is deplorable.

The media account referenced is a Reuters story from 2010: WellPoint routinely targets breast cancer patients. In the story, women alleged that WellPoint was using software to target them for fraud investigations and terminate their policies. This practice of identifying patients with expensive care and searching for a reason to terminate their case retroactively is known as recission.

They had no idea that WellPoint was using a computer algorithm that automatically targeted them and every other policyholder recently diagnosed with breast cancer. The software triggered an immediate fraud investigation, as the company searched for some pretext to drop their policies, according to government regulators and investigators.

Once the women were singled out, they say, the insurer then canceled their policies based on either erroneous or flimsy information. WellPoint declined to comment on the women's specific cases without a signed waiver from them, citing privacy laws.

A year earlier, in 2009, the Congressional Oversight Committee on Energy and Commerce held a hearing on recission. Michigan Democrat Bart Stupak claimed that WellPoint not only used rescission to deny claims, they rewarded employees based on the amount of money they saved the company;

The investigation has also found that at least one insurance company, WellPoint, evaluated employee performance based in part on the amount of money its employees saved the company through retroactive rescissions of health insurance policies. According to documents obtained by the committee, one WellPoint official was awarded a perfect score of five for exceptional performance based on having saved the company nearly $10 million through rescissions.

The representative from WellPoint denied this claim in the hearing, stating that the two cases cited by the committee were unrelated to the practice. I can’t get the actual records presented to the committee, so it’s hard to tell which is true.

A year before that, in April 2008, the City of Los Angeles took on WellPoint for the practice. They offered a bit more technical of an explanation - essentially, WellPoint would identify expensive diagnostic codes and then target patients for fraud investigations, which they called “postclaims underwriting.” According to the complaint, the patients (who often had serious illnesses) would then be sent complicated paperwork with short response times, sometimes as short as 10 to 21 days to reply.

According to the complaint the practice went back years;

Beginning at a time currently unknown to Plaintiff, but believed to be not later than 2002, Defendants selected from the thousands of diagnostic code numbers a list of the code numbers that appeared to them to be associated with conditions whose treatment was likely to be costly. In a report on Defendants' practices, the DOI has denominated the codes that trigger Defendants' postclaims underwriting process 'rescission diagnosis codes.'

California argued that WellPoint used these practices to deny benefits to over 6,000 individuals back to at least 2002. Mr. Schaeffer was the CEO of WellPoint from 1986 to 2004.

1. When the 9-12 District can fund a $48 million dollar capital improvement project with private money while the K-8 district can barely fund a capital improvement with public money - I think that’s a real problem. Why is a 9th grader worth so much more than 1st grader to the people of Evanston? This all makes no sense to me.