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Patrick Springer, Published November 09 2010

Blue Cross Blue Shield lays off 63 workers in cost-cutting move

Blue Cross Blue Shield of North Dakota has trimmed 13 percent of its payroll by laying off 63 employees and not filling 57 vacancies as part of a cost-cutting strategy.

The layoffs, announced Monday, will save $3 million in future annual payroll costs but result in a one-time severance payout of $875,000, the company said.

Altogether, the efficiency moves will cut $13 million from the Blues’ budget next year, with 60 percent of total costs attributed to payroll and benefits.

Besides trimming costs, the job cuts are aimed at repositioning the health insurer and making it more competitive, said Denise Kolpack, vice president of corporate communications.

“We aren’t asking the remaining employees to simply do more,” she said. “We’re trying to leverage technology to be more efficient.”

For example, the company is looking into ways customers can help themselves by using automated systems and consolidating its calling centers, she said.

The company is also investing in areas of critical importance, such as $2.5 million in initiatives to reduce claims, including those to curb medical costs by better managing chronic and rare diseases.

Blue Cross Blue Shield expects those efforts will reduce claims expenses by $10 million. Medical inflation now is running at an average of 7.3 percent, Kolpack said.

Among those laid off, six employees were let go immediately, with the rest of the terminations to be staggered through next May.

The tenure of those laid off varies from one year to about 30 years, and were scattered throughout the company, including management positions, Kolpack said.

As of Monday, the company has the equivalent of 815 full-time employees, a number that will dwindle to 758 when all of the layoffs have occurred.

The layoffs fell heavily on the information services division at Blue Cross Blue Shield, in part because affiliated Noridian Administrative Services is cutting back on demand for contracted services.

“The majority were from the information services area,” Kolpack said.

Those who are losing their jobs are eligible to apply for positions with affiliated companies, Noridian Administrative Services and Corelink.

The last time Blue Cross of Blue Shield of North Dakota laid off employees was in 1998, when the company announced plans to eliminate almost 100 positions. Many of those were accomplished through attrition or early retirement, Kolpack said.

Severance includes a month’s pay, with additional payments possible under a severance formula based on factors including length of service.

The efficiency drive began more than a year ago. Last year, following an audit that documented “questionable” administrative expenses, Insurance Commissioner Adam Hamm pressured Blue Cross Blue Shield to cut its expenses. Hamm was unavailable for comment Monday.

Also, employer groups, including the North Dakota Public Employee Retirement System, have called for better cost controls. Cost containment will be one of the performance goals that executives and managers must address in a new incentive pay plan that will go into effect next year.

Cost containment to make insurance more affordable remains the company’s top priority, Kolpack said.


Readers can reach Forum reporter Patrick Springer at (701) 241-5522