Business

Blue Cross tells employees layoffs caused by cost-cutting, outsourcing and over-staffing

Blue Cross and Blue Shield of North Carolina told employees in an internal memo that recently announced layoffs were due to cost reductions and outsourcing, in addition to overly aggressive hiring to prepare for this year’s Affordable Care Act enrollment. The company also said it had laid off an additional 15 employees because the jobs were outsourced.
Blue Cross and Blue Shield of North Carolina told employees in an internal memo that recently announced layoffs were due to cost reductions and outsourcing, in addition to overly aggressive hiring to prepare for this year’s Affordable Care Act enrollment. The company also said it had laid off an additional 15 employees because the jobs were outsourced. N&O File Photo

Blue Cross and Blue Shield of North Carolina has told company employees that recently announced layoffs were due to cost reductions and outsourcing, as well as a corrective to aggressive hiring in preparation for this year’s Affordable Care Act enrollment.

The News & Observer reported on May 17 that Blue Cross and Blue Shield was laying off 165 customer service representatives, many of whom had been brought in to enroll ACA customers. The majority of them work in Durham and the others work out of the company’s offices in Fayetteville and Winston-Salem.

At the time Blue Cross spokeswoman Ryan Vulcan confirmed the layoffs and explained that they were in response to hiring customer service staff last year that are no longer necessary now that open enrollment is over.

Blue Cross provided a fuller explanation to employees in an internal communication on Friday, May 19. In addition to the 165 cuts in customer service, the company also disclosed to employees that another 15 jobs in the claims-processing department would be cut because the insurer was outsourcing that function. The outsourcing to global firm Accenture was announced three years ago and is now largely completed, the Blue Cross internal memo said.

The company stressed an economic rationale for its decisions.

“These decisions are among a number of moves we are taking to reduce our costs and reach our target price for our products,” Blue Cross told employees. “Continuing to take steps to make our premiums more affordable is important to our long-term success.”

The memo went on to say that the 15 outsourcing-related job cuts were “far smaller than we originally expected.”

“While we carefully plan our staffing levels, we currently have more employees in Core Service than is justified by customer and business needs. That’s because the performance of our systems has greatly reduced the time it takes to answer and handle calls. And we have had fewer staff departures than normal.”

Accenture now handles about 80 percent of claims for Blue Cross’s commercial plans and for Blue Cross customers from other states who receive medical services in North Carolina. Blue Cross staff is still handling some claims, including claims that require extensive research and medical review. Also, Blue Cross kept claims processing work in-house for the State Health Plan, Federal Employee Program and its Medicare products.

The bulk of the layoffs are caused by proactive over-staffing after being hit with a $3.6 million state fine for widespread problems during ACA open enrollment last year. The N.C. Department of Insurance levied the record fine against Blue Cross after thousands of customers complained of billing and enrollment errors, and hours of waiting on hold for an available customer service representative.

“We roughly tripled our staff of customer service professionals for the 2017 open enrollment period for the Affordable Care Act,” the notice said. “We did so because of the large increase in new customers and to be prepared in the event of a repeat of any of the operational problems we experienced in 2016.”

In addition to last year’s enrollment problems, Blue Cross was also preparing for a significantly higher ACA enrollment this year. The company was expecting an additional 260,000 people to enroll for 2017 after two other insurers – Aetna and UnitedHealthcare – withdrew from the federal insurance marketplace this year.

The extra customer service employees hired for open enrollment fielded customer calls and helped work out issues with health insurance selections, but became superfluous once customers enrolled and got their issues sorted out. The jobs will be terminated in June and will affect Blue Cross staff, contractors and vendor call-center workers, spokeswoman Ryan Vulcan said last week. The customer service cuts are coming from a staff of 1,100, which will leave more than 900 for customer support duties.

It was unclear whether the customer service employees were told when they were hired that the jobs were temporary.

Nevertheless, the layoffs were apparently not expected within the company, judging by a separate company-wide email sent Friday by Blue Cross chief operating officer Gerald Petkau.

He acknowledged that “this week has been a difficult one” and emphasized the company’s focus on financial sustainability.

Petkau, who received a bonus exceeding $1 million last year and a total compensation package worth $1.8 million, emphasized the importance of “seeing the big picture and and making hard decisions that position us for success in the long-term.”

Petkau also assured employees that if they had questions about the staff cuts, or anything else, they could sign up for a “listening exchange” with him, to be held in the coming weeks.

John Murawski: 919-829-8932, @johnmurawski

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