Blue Cross to lay off 1,000, seek rate hikes

Christina Rogers / The Detroit News

Blue Cross Blue Shield of Michigan announced major cutbacks today, including a workforce reduction of nearly 1,000 employees by the year's end, cutbacks to executive pay and compensation, and a reduction in discretionary spending by 25 percent, the nonprofit health insurer confirmed in a press release this morning.

The state's largest insurer will also seek to raise rates across all of its individual lines of insurance, which combined cover about 300,000 Michigan residents.

Blue Cross officials said the cuts are intended to help preserve the organization's financial stability and offset losses incurred on its individual line of insurance -- policies bought by people who aren't covered by their employers. Those losses could exceed $1 billion combined over the next three years, Blue Cross said.

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Employees were notified of the downsizing this morning in a video message sent by Blue Cross CEO Daniel Loepp.

"We should not ask our individual subscribers to pay more, without first demanding sacrifices from ourselves," Loepp told employees in the webcast this morning.

The first round of job cuts will take place over the next 60 days with the goal of reducing the workforce by 400 jobs. Blue Cross then plans to layoff another 600 workers by year's end. The job cuts will affect the parent company and Blue Care Network only and will include both salaried and bargaining employees with a goal of a 5 percent reduction in positions across all divisions.

Blue Cross will also ask the United Auto Workers for a deferral of the 3 percent increase in pay for bargaining unit employees recently negotiated in their last labor agreement.

Along with pay cuts, the insurer is also reducing its advertising and lobbying spending by 25 percent.

And it will seek to raise rates on three types of self-insured policies -- a 55 percent increase for individual plans, 42 percent for group conversion and 32 percent for Medicare Supplemental plans.

The cutbacks were precipitated by the state legislature's failure to act on a bill package that could have helped Blue Cross stem losses incurred in the individual market, Blue Cross said.

Blue Cross had spent nearly two years pushing the state to change rules restricting what it charges for individual health insurance coverage, but there was no compromise between House-passed and Senate-passed versions of the bills.

Lobbying had been intense on both sides, with the legislation's opponents, including Attorney General Mike Cox, saying it's a power grab by the Blues that would hurt consumers.

The job cuts follow those made in October when Blue Cross laid off about 100 workers from its Metro Detroit offices, including the nonprofit's headquarters in downtown. The positions included both union jobs and salaried jobs.