Rising healthcare costs have put Blue Cross Blue Shield of Michigan in cost-cutting mode, leading to the elimination of 64 jobs.
The Detroit-based insurer eliminated the positions this month in response to its $544 million underwriting loss, largely attributed to a $1.8 billion rise in pharmacy costs.
Related: Michigan’s largest insurer to drop weight-loss drug coverage
"Our company sits in an uncomfortable position between two extraordinary pressures — the skyrocketing increase in healthcare costs and the desire of our customers to maintain the affordability of their health insurance plans,” BCBSM said in a statement to Crain’s. “We owe it to our customers to take actions to address our cost of doing business. As part of a broad effort to immediately address our administrative costs, Blue Cross has taken cost-reduction measures including reductions in discretionary spending and marketing, and eliminating 64 positions, out of more than 10,800, across several divisions of the company.”
The Blues did not specify the type of positions eliminated, where those jobs were located and whether more cuts are expected.
BCBSM is working to address long-term costs and plans to create more cost-savings in the future. The company is preparing for a leadership transition, as longtime CEO Daniel Loepp retires and Tricia Keith takes the helm in January.
“Working within our organization to become more efficient and manage our cost of doing business, we will do more to ensure health insurance affordability, and the security and peace of mind that comes with it, for our members and customers,” the company said in a statement. “The reductions in staff, combined with other immediate cost savings measures, allow us to address current financial issues driven by dramatic increases in drug and medical costs.”
Not a Modern Healthcare subscriber? Sign up today.
Healthcare costs have risen across the board in recent years, but the rising popularity of GLP-1 drugs such as Ozempic and Wegovy used to treat Type 2 diabetes and weight loss have rocked the Blues bottom line.
Those drugs cost the insurer $350 million more in 2023 than in 2022. In January, BCBSM said that Wegovy cost the insurer about $1,600 per month, per patient and Zepbound costs about $1,200 per month, per patient.
But BCBSM ended coverage of GLP-1s for weight loss for most fully-insured members on July 1 and is shutting down all coverage of the weight loss drugs by Jan. 1 for members.
The recently introduced drugs have seen runaway demand as they’ve proven to be highly effective in helping people lose weight. The drugs were first approved for use in diabetics, but the surge in use began in 2021 when Wegovy was first approved for weight management and continued after it was approved for adolescents in late 2022.
Download Modern Healthcare’s app to stay informed when industry news breaks.
But while BCBSM is facing pricing pressure from rising costs, its investment portfolio kept the Blues in the black last year. The portfolio generated $757 million in income last year, up from the $74 million loss the year before.
Those investment gains allowed BCBSM to report total net income of $100 million, resulting in a margin of 0.2% on the year. Though a small net income, it’s in sharp contrast to its $777 million loss in 2022.
This story first appeared in Crain's Detroit Business.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.
