Blue Cross and Blue Shield of Michigan plans to make voluntary separation offers to its more than 10,500 employees as the Detroit-based health insurer works to cut administrative costs.
The state's largest health insurer extended the offer to 8,650 nonunion employees, according to a company statement sent to Modern Healthcare's sister publication Crain's Detroit Business on Monday. It is working to potentially make the same offer to another 2,060 workers represented by the UAW.
The voluntary separation offers open Sept. 28 and close Oct. 23. They come with compensation and healthcare benefits, commensurate with length of service, up to 52 weeks. The offers are available in addition to retirement benefits for those eligible.
"The current state of our business is strong," CEO Daniel Loepp said in the statement. "We have come through a successful period of Strategic Business Transformation which enabled our enterprise to become more efficient and improved our competitive cost position in the market. But there are significant financial headwinds on the horizon and our health insurance business remains challenged by administrative costs. We are at a point where we've decided to slow our hiring activity."
The Michigan Blues reported $556.1 million in net income during the first six months of this year, 2.6% lower than the same period in 2019, Crain's reported Friday. While spending on medical care fell almost 8%, administrative costs for the Blues rose about 35% amid the COVID-19 pandemic.
Loepp said in Monday's statement that in addition to alleviating financial strain on the company, the separation packages provide employees the opportunity of reordering "work-life balance or doing something new."
The offer is available to Blues employees as well as those with its affiliates, including Blue Care Network, Emerging Markets and Accident Fund Insurance Company of America, the release said.
Helen Stojic, director of corporate affairs for the company, said the health insurer does not have a target for the number of employees accepting the separation offer, nor is there a projected cost savings. Continued uncertainty from the pandemic and impact to employer groups throughout the state could lead to further adjustments for the insurer.
"Management has made no decision to downsize our workforce," Stojic said in an email. "We will see how the offer affects our employment base and costs at year's end, and continue to move forward in our ongoing work to address our administrative costs. We continuously review our business and make changes as needed in the normal course of business."
This story first appeared in our sister publication, Crain's Detroit Business.