The newly appointed head of Blue Cross Blue Shield of Massachusetts Wednesday promised to focus on reining in the galloping pace of health care cost increases for the insurer's customers. 'Slowing the unacceptable rate of increases will be the top priority of the organization,' said Andrew Dreyfus, who takes over on Sept. 7 as president and chief executive of the largest health insurer in the state, with 2.5 million members. 'Massachusetts has made progress in making health care accessible. But we have a lot of work to do on affordability.' Dreyfus, 51, a longtime health policy insider in state government and business, has served as executive vice president for health care services at Blue Cross for the past five years. He oversaw development of a product, called the alternative quality contract, that company officials hope can become a new affordable health care payment model. His onetime boss, former governor Michael S. Dukakis, Wednesday hailed Dreyfus's selection, saying he understands the complexities of health care and will bring a sense of social justice to the challenge of holding down prices. 'The cost issue is going to be the issue, and the insurers are going to have to play a large role in addressing it,' Dukakis said. 'Andy is a guy who comes to this not only with a lot of experience in the public sector, but he's a local guy. He's not coming in here from Timbuktu.' Paul H. Guzzi, who chaired the Blue Cross board that selected Dreyfus, said the five-month search focused on people inside the Boston-based organization after some outside candidates were scanned. 'We wanted someone who knows the company, knows the community, knows health care, and was not only an outstanding leader but also a team builder,' said Guzzi, chief executive of the Greater Boston Chamber of Commerce. Dreyfus replaces William C. Van Faasen, the longtime Blue Cross chairman and CEO who retired in 2005 but returned to run the insurer on an interim basis after his successor, Cleve L. Killingsworth, resigned in March. Guzzi said Van Faasen, who did not take a salary in his temporary position, will remain in a role still to be determined. Wednesday , Blue Cross had not decided on Dreyfus's pay package. Killingsworth was paid $1.9 million last year. 'The board is in the process of discussing contract terms with Andrew,' said Blue Cross spokeswoman Tara Murray. 'And the board is sensitive to the interest and concern in the community with regard to executive compensation.' Dreyfus earned $698,766 last year. When Van Faasen stepped down, he was criticized for collecting more than $16 million in retirement benefits, much of it from incentive awards received over decades. Dreyfus, a lifelong Boston-area resident, takes the helm at a time when rising costs have become a burden for businesses and consumers and a thorn for insurers and health care providers. Blue Cross, like other insurers, has been embroiled in a dispute for much of this year over the Patrick administration's rate caps. Last week, the company said it lost $14.3 million in the second quarter, partly because of 'inadequate premiums,' due to a state cap on increases for small businesses and individuals. The insurer settled with regulators this month, voluntarily limiting its 2010 rate increases to single digits in those segments of the market. Initially, it had sought average base rate increases ranging from 10 to 19 percent. Blue Cross said it expects a financial loss in 2010 because it can not cover its costs. 'We need to restore the company to a stronger financial position,' Dreyfus said. 'We obviously do not want to be in a position where we're losing money.' He said the settlement with the state will allow both sides to put aside their differences and work to control costs. A realistic aim, he said, is to limit annual increases to 3 to 5 percent, rather than the 8 to 10 percent of recent years. But that would require restraint from providers with whom the insurers negotiate reimbursement rates for medical care. 'Andrew's been a tough negotiator, but he knows how to collaborate,' said Tim Gens, executive vice president at the Massachusetts Hospital Association. 'Hospitals have a responsibility to address costs, but it's not just their responsibility.' Toward that end, Dreyfus said Blue Cross hopes to expand its alternative quality contract to more health care providers. The contract includes a so-called global payment system in which providers are paid fixed amounts based on the estimated annual costs of patients' care, instead of the fee-for-service system under which insurers are billed for individual visits and procedures. It also includes incentives to improve quality. About one-third of the 1.2 million members in Blue Cross's HMO subsidiary are covered by the contract. Jeanette G. Clough, president of Mount Auburn Hospital in Cambridge, which signed the first alternative quality contract with Blue Cross, said Dreyfus is the perfect choice to help restore the spirit of collaboration between payers and providers that propelled the state's 2006 health care overhaul. That collaboration has frayed this year. Dreyfus 'is a good thinker who works with payers, providers, and policy makers,' Clough said. 'He's someone you can trust.' Dreyfus graduated from Connecticut College and worked as editor of the South End News. He then joined the Dukakis administration, serving in several posts, including at the Executive Office of Consumer Affairs and Business Regulation. He was executive vice president at the Massachusetts Hospital Association before he joined Blue Cross in 2001 as the first president of its foundation. He lives in Newton with his wife and two children. 