Posted on Fri, Nov. 6, 2009
By Jane M. Von Bergen
More than 500 Independence Blue Cross employees have accepted early-retirement packages, as Philadelphia's largest health insurer struggles to cut costs.
The buyout was offered to 840 employees. Most of the 530 who opted for it left last Friday. Employment at Blue Cross has declined more than 700 since the start of the year.
"Like any business in the current environment, we are taking prudent steps to manage costs and risks, including organizational streamlining," the company said in a statement released yesterday.
"We are currently analyzing the impact of the results of the voluntary early-retirement program, and we have not made any further definitive plans regarding our future staffing needs."
Communications to the employees said that, depending on response to the offer, "it's possible that we may need to further reduce staffing or other expenses."
Health insurers all over the country are shedding jobs, in tandem with major cuts by the nation's employers. When companies lay off employees, they and their families lose their health insurance and the insurers lose business. Employment-based insurance remains the main way that people are covered.
"People don't understand the ripple effect," said Chris Curran, a spokesman for Cigna Corp. In a year, Cigna's medical membership declined 800,000, the Philadelphia insurer said yesterday.
Independence Blue Cross had a loss of $78.7 million in 2008, compared with net income of $170.9 million in 2007. Medical membership dropped to 3.3 million as of Sept. 30, compared with 3.4 million in December.
Employment also fell from 6,450 in December. About 125 employees, mostly in marketing, were laid off in June. With attrition and the latest cuts, employment is now about 5,700.
In documents seeking the early retirements, the company told employees that cuts in administrative costs were needed to respond to employers who want to provide health insurance, but "are struggling as sharply escalating health-care costs drive premiums higher."
One document said: "It's possible that we may need to further reduce staffing or other expenses to achieve our 2010 financial plan."
Associates may feel anxious or concerned about the stability of the company, one document said, adding that "it is critical to maintain positive behavior," and that employees should "keep your skills current and look for opportunities for cross-training."
But, the document said, vacancies will not be filled, and opportunities within the company will be minimal.
Employees had until last Friday to make a decision. Eligible were those age 55 or older with 10 years' seniority. Also eligible were workers whose age and length of service added up to at least 75.
R.B. Drennan Jr., chairman of Temple University's risk, insurance, and health-care management department, said that medical-membership declines were only one factor in the health insurance industry - and that the worst of that was likely over as layoffs had slowed.
To hold the line on expenses, "employers are being very aggressive in negotiating renewals," Drennan said. Plus, concern over the health-care debate may be prompting insurers to slow premium increases as a public-relations strategy.
"Back in the mid-1990s, when proposals by First Lady Clinton looked like they were going to pass, there was a dramatic change in the rate of increase," he said.
Independence Blue Cross is not the only insurer shedding employees.
The nation's largest private health insurer, WellPoint Inc., of Indianapolis, cut 1,500 jobs this year.
Yesterday, Cigna announced a $7 million charge against earnings, in part to pay severance to 1,200 people being laid off this year, Curran said.
Aetna Inc., the Connecticut-based insurer that writes policies in this market, laid off 977 in December. "We've done nothing this year," said spokesman Fred Laberge.
But, he said, Aetna did warn that it would look to align its expenses, including labor costs, to meet the economic situation.
Despite layoffs, the insurers are still recruiting. Drennan said Independence Blue Cross, Cigna, and Aetna had all been on college campuses, looking for entry-level talent.
Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.
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