University Health Alliance, the state’s fourth-largest health insurer, has a new leader at the helm.

Max Botticelli, a founding physician of UHA, has turned operations over to Howard Lee, the insurer’s chief operating officer since 2003.

Botticelli, 79, will retire on May 1 and continue as chairman of the company’s board of directors, which unanimously voted to name Lee his successor rather than launch an executive search, the company said yesterday.

"Dr. Botticelli leaves the company in good shape," UHA said in a statement.

The company has built its niche in providing health insurance to the small business market.

At the end of last year, UHA had 36,505 members, mostly from companies with 50 or fewer employees. UHA ended 2010 with revenues exceeding $117 million. The health plan has about 100 employees.

"Dr. Botticelli’s sincere concern about the health and well-being of our members has been a founding value for UHA," said Mark Yamakawa, vice chairman of UHA’s board of directors. "He leaves a lasting, positive impression on the UHA employees and over the years, Dr. Botticelli’s values have become embedded in UHA’s policies and culture."

Established in 1996 by a group of physicians on the faculty at the University of Hawaii’s John A. Burns School of Medicine, UHA has had its share of financial troubles.

When it was a fledging health insurer, UHA’s reserves dipped below state requirements and in 2001 it was taken over by the Insurance Division.

The health plan managed to increase premium revenue and reduce costs with wage freezes and other measures to emerge from state supervision in 2004.

It also withstood competition from a mainland insurer, Summerlin Life & Health Insurance Co., which failed to gain enough market share to stay in business after entering Hawaii in 2004.

UHA is one of four longtime commercial health insurers, including the Hawaii Medical Service Association, Kaiser Permanente Hawaii and the Hawaii Medical Assurance Association.