Blue Cross Blue Shield of Michigan is offering buyouts to eligible employees as it aims to cut $600 million from its budget over the next several years. The company has lost more than $1 billion on its core health insurance business in the past two years due to rising prescription drug prices and increased healthcare utilization. In a memo dated January 10th, CEO Tricia Keith stated that Blue Cross plans to slash $285 million in administrative expenses this year alone.
To help achieve these savings, the company is offering voluntary separation offers to its non-bargaining unit employees. The buyouts will be calculated based on years of service and added to ordinary retirement benefits for those eligible to retire. Employees have until January 31st to accept the offer.
“We are hopeful that this voluntary separation offer will help us right-size the organization to a level that aligns with our financial targets,” the memo read.
Employee buyout strategy details
“However, if it does not, additional employment actions may be needed.”
In a statement emailed by company spokeswoman Meghan K.
O’Brien, Blue Cross Blue Shield of Michigan said: “Our company has lost more than $1 billion on our core health insurance business in two years, and these costs are now weighing heavily upon our ability to continue providing affordable health coverage. As a nonprofit mutual health insurer, we must manage our finances responsibly, with the interests of our customers and members front-and-center. As we take double-digit premium increases out to our fully-insured customers now to account for the higher costs we are experiencing, we have a responsibility to look inward and take steps to lower our own costs.”
During its most recent annual financial briefing in March, Blue Cross Blue Shield of Michigan reported an underwriting loss of $544 million in 2023.
The insurer experienced an increase of $1.8 billion in pharmacy claims and a $1.4 million increase in claims costs for medical services in 2023, officials said. Tricia Keith became president and CEO of Blue Cross Blue Shield of Michigan on January 1st, succeeding the retiring Daniel Loepp. As of last summer, Blue Cross had a nationwide employee headcount of 12,500, including its subsidiary companies.
Blue Cross remains the largest health insurance company in Michigan based on covered lives.