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Friday, February 04, 2000 Page: 1A
WILKES-BARRE – After four years of mounting managed-care losses, Blue
Cross of Northeastern Pennsylvania announced Thursday it is laying off 53
employees and leaving 46 open positions unfilled.
In part, company officials blamed its financial woes on an aging, sicker
population that requires more health care and more expensive health care.
The company is spending more money than ever on drugs many of which were
not available a few years ago.
The cost of medical care is increasing.
The reimbursements Blue Cross receives for federal programs, such as
Medicare, are inadequate.
The layoffs – affecting 4.3 percent of the 1,213 employees – and the hiring
freeze will save the company an estimated $5 million annually. Other budget
cuts will save an additional $5 million.
The layoffs affected management and staff positions throughout all
divisions in the company. A dozen managers lost their jobs.
The company’s traditional, indemnity plan is solvent, and the local company
is the top Blues plan in the nation for liquidity and risk-based capital,
company officials emphasized in a written statement.
President and Chief Executive Officer Denise Cesare, in the statement
reiterated earlier comments that the layoffs, part of a corporate
restructuring, were driven by the company’s desire to become more efficient.
In the statement, Blue Cross described its actions Thursday as
“rightsizing” – an effort to bring its costs in line with industry norms.
But, the $40 million in losses recorded in 1999 by managed-care subsidiary
First Priority clearly was a driving factor.
A significant share of First Priority Health’s money woes are attributable
to its Medicare managed care product, First Priority 65, the company said.
Although the managed-care plan for seniors represents only 14 percent of
the total First Priority members, it accounted for $13 million, or more than
32 percent of the losses.
First Priority 65 pays out $1.08 in costs for every dollar collected in
premiums. Annually, the company loses $440 for each First Priority 65
enrollee.
And, the Blue CHIP program for children who otherwise would not have
insurance, another First Priority product, pays out $1.38 for every $1 in
premiums. Annually, the program costs the company $290 per participant.
“It has been extremely painful for us to disrupt employees’ lives,”
Cesare said. “In the company’s 60 years, surely this is one of the most
difficult decisions our organization has had to make.”
Outside the Blue Cross offices on North Main Street, employees expressed
regret and relief about the announcement.
One worker – who asked not to be identified – said the mood had been bleak
in recent days, but she was hopeful the worst is over.
“The tension was so thick in the place,” said the nine-year employee.
“No one knew what was going to happen.
“Everybody was relieved that it was over. There should be no more problems
now.”
But another worker was not as optimistic.
“It’s sad,” said a 10-year employee. “A lot of people have been there a
long time.”
The employee – who also declined to give her name – did not know which
workers have lost their jobs, but said the announcement has widespread impact.
“It’s like everybody’s been through a wake. You just don’t expect it.”
Blue Cross will provide severance, benefits, outplacement counseling and an
employee assistance program to the workers losing their jobs. Severance will
be based on length of service and compensation.
The company will pay unused vacation and personal time and will provide
health benefits for the duration of the severance period.
The company has made reductions in other areas, from the marketing budget
to travel, legal help, consulting, office supplies and postage.
In light of the layoffs, Constance M. Jewett, corporate director of
communications and public relations, defended the company’s marketing
promotions with the Wilkes-Barre/Scranton Penguins, the American Hockey League
team housed at First Union Arena in Wilkes-Barre Township.
Blue Cross shares those costs with Pennsylvania Blue Shield. And, the
Penguins promotions come out of the marketing budget, which has been reduced.
Staff writer M. Paul Jackson contributed to this story.
Call Turfa at 829-7177.