Blue Cross Blue Shield of Michigan offers employee buyouts as claims costs ‘skyrocket’
Blue Cross Blue Shield of Michigan is offering buyouts to its nonunion employees as the health insurer tries to cut $285 million in administrative expenses this year, according to a memo from The Blues’ new top executive.
In the Jan. 10 memo to employees, CEO Tricia Keith said the insurer is facing financial pressure from “skyrocketing” costs for prescription drugs and “dramatically increased utilization” of health care services, which have made it harder to keep Blue Cross’ health insurance products affordable.
So Blue Cross is aiming to cut $600 million from its own administrative expenses over the “next several years,” with $285 million to be cut in just 2025, the memo says.
To help achieve the cost savings, Blue Cross is offering voluntary buyouts for its non-bargaining unit employees. The buyouts, formally called “voluntary separation offers,” will be calculated based on years of service, and for those eligible to retire, would be in addition to their ordinary retirement benefits, the memo said.
The deadline to accept the buyout offer is Jan. 31. The memo did not say how many employees they hope will take the offer.
“We are hopeful that this (voluntary separation offer) will help us right-size the organization to the level that aligns with our financial targets,” the memo read. “However, if it does not, additional employment actions may be needed.”
It added, “Reducing the size of our workforce will also require a reframing of our mindsets, as we continue to transform into a more innovative and efficient organization.”
Reached for comment Monday, Blue Cross issued a statement that said it continues to face high costs and lost over $1 billion on its core health insurance business in two years.
“As we take double-digit premium increases out to our fully-insured customers now to account for the higher costs we are experiencing,” the statement said, “we have a responsibility to look inward and take steps to lower our own costs.”
Blue Cross this year raised premiums on its small group plans — those for businesses and organizations with fewer than 51 employees — by an average of about 11.5%.
Keith became president and CEO of Blue Cross Blue Shield of Michigan on Jan. 1, taking over from the retiring Daniel Loepp.
More: Why retiring Blue Cross CEO Dan Loepp doubled the insurer’s balance sheet
As of this summer, Blue Cross had a total nationwide employee headcount of 12,500, including its subsidiary companies, a spokesperson previously said.
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