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A mathematical David stuns a healthcare Goliath

A respected actuary working from his rural Riverside County home — and for a time from a hospital bed — uncovers the errors that led Anthem Blue Cross to cancel rate increases of up to 39%.

July 15, 2010|By Duke Helfand, Los Angeles Times

David Axene was flat on his back in a hospital bed with a swollen left leg. His kidneys had shut down. His blood pressure had plunged. Doctors pumped him with potent antibiotics to stave off a deadly infection.

Yet there he was sifting through spreadsheets on his laptop, cradling his cellphone to his ear, waving off doctors to finish another conference call.

California's top insurance watchdogs had hired Axene to scour Anthem Blue Cross' files for any flaw in the voluminous paperwork that accompanied its rate hikes of up to 39%.

Anthem's plan to impose higher premiums March 1 had outraged consumers and politicians alike. President Obama seized on the furor, criticizing Anthem's increases on national television as he tried to revive fading support for his healthcare overhaul.

California regulators were bound by law to accept the rates as long as Anthem could show that it used at least 70 cents of every dollar in premiums to pay medical claims. In the past, Anthem's requests had sailed through with barely a peep from officials. Not this time. The outcry was too great to ignore.

That's where Axene came in.

The state looked to him for an impartial judgment. The stakes had never been higher for the 60-year-old actuary: Finding an error in Anthem's 70-page rate proposal and reams of supporting documents would dent the image of California's largest for-profit insurer and possibly save consumers tens of millions of dollars. He knew his work had to be flawless.

"I wasn't going to let this illness stop me," he said.


The son of an evangelical pastor, Axene grew up in Canada and Washington state, schooled from a young age on the importance of faith, love and hard work. Blessed with a gift for numbers, he dreamed of becoming an aeronautical engineer. But in the early 1970s, jobs were scarce in Seattle for college graduates with degrees in physics and applied mathematics.

At 21, Axene found himself pumping gas.

Then a friend told him that Travelers Insurance Co. was hiring. He applied for a sales position and bombed the interview, recalling the recruiter's stinging words: "Axene, you couldn't sell your way out of a wet paper bag."

But the recruiter asked whether Axene had ever thought of becoming a health actuary — a mathematician who calculates insurance rates by evaluating life expectancies, medical histories and other risk factors.

Axene had never heard the term, but the interview launched him into a career with some of the nation's most influential accounting and actuarial firms, including Ernst & Young, where he supervised 45 actuaries and enjoyed a corner office with a sweeping view of San Diego Bay.

Ernst & Young downsized seven years ago, leaving Axene, then 53, out of work.

He decided to start his own business in his Temecula home and later moved to the nearby rural enclave of Winchester, where housing developments and horse ranches stretch over sun-dappled hills.

There, a small office behind his master bedroom serves as the corporate headquarters of Axene Health Partners. He shares the bare-bones space — dubbed "the Outhouse" — with Tiffany, his office manager and daughter-in-law, and his son Josh, an actuary, while six other employees work from their homes in California and Oregon. Axene likes it that way, surrounded by family in a tranquil place where he can wear shorts and deck shoes to work.

"It's no luxury office," he said as his wife, Dawn, dropped by to offer a glass of iced tea.


Axene Health Partners is off the beaten path, but it was well known to senior managers from the California Department of Insurance as a top-flight actuarial firm with a reputation for deft work. So when they wanted someone to double-check Anthem's numbers in mid-February, they called Axene, who personally took on the project and enlisted three of his staffers, including Josh.

Axene and his actuaries set about reviewing Anthem's proposal and more than 1,000 pages of internal documents and Excel spreadsheets filled with columns of numbers and formulas and equations — a mind-numbing mound of data that produced a stack of paper 18 inches high.

"This was a brain stretcher," he said. "It may be the most intense project we've ever worked on."

Axene relied not only on his math skills but also on a higher power: He prayed for insight and wisdom each morning before launching into another round of numbers sleuthing, often drawing inspiration from a worn Bible he keeps in his office.

"I'm one of those crazy people who believes that God listens to our prayers," he said.

A month into the investigation, Axene came down with what he thought was the flu. Tests turned up a blood infection that could have proved fatal. He landed in a Wildomar emergency room and was soon undergoing surgery to drain the infection from his left knee.

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