Blue Cross Blue Shield of Michigan intends to cut at least 400 jobs and perhaps as many as 1,000 during 2009, blaming increased losses on health insurance policies issued to individuals that could mount to $1 billion by 2011.
Vice President for Corporate Communications Andrew Hetzel said that while most of the initial 400 cuts are expected to affect its southeast Michigan office, he could not say how many employees might be impacted in Grand Rapids.
“This is a company-wide impact across divisions. Folks who work out in Grand Rapids work for at least a couple divisions of the company,” he said. “It’s too early to tell. We anticipate some folks out in Grand Rapids will be impacted.”
He said the Cascade office employs 240, while another 272 work in the former Steketee’s building in downtown Grand Rapids. Other BCBSM offices are scattered throughout West Michigan.
Hetzel said the insurer intends to ask the state Office of Financial and Insurance Regulation for individual market raises of an average 55 percent for 136,000 nongroup policy holders, 42 percent for 72,000 in group conversion plans and 32 percent for Medicare supplemental policy holders.
“We realize these cuts take money away from Michigan’s economy, but these are responsible actions for the company to take in that we will be asking our individual subscribers to pay more,” Hertzel said.
He declined to say whether BCBSM would try again to seek regulatory reform in the Legislature in 2009. The company was unsuccessful in convincing legislators to change the rules in 2008, despite spending millions on lobbying and advertising.
“We would love to see a solution developed in Lansing to fix the market. The market is broken,” he said.
Other than losses in the individual market, BCBSM remains a financially stable company, Hertzel said.
“These losses on the individual product are a very significant drag on what otherwise is a financially healthy company,” he said.
However the cutbacks will be enforced throughout the health insurance side of the company. He said for-profit subsidiaries selling other types of insurance will not be affected.
Other cost saving measures include a:
- Salary reduction for senior executives.
- Freeze on executive pay for the second time in three years.
- Reduction in the number of executives.
- Freeze on salaries for non-unionized workers.
- Request of the United Auto Workers to delay a 3 percent pay increase.
- 25 percent reduction in spending on advertising, lobbying and discretionary spending.
Cutbacks to community programs and donations to nonprofits are also being pursued.