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Blue Cross Blue Shield of North Carolina braces for health insurance reform

Maryalene LaPonsie | July 21, 2010

By: Maryalene LaPonsie

As the largest insurer in the nation, Blue Cross may have more at stake in the recent health care debate than any other insurer. Offering everything from group plans to short term disability to health insurance for the self-employed, the 39 Blue Cross companies provide medical coverage for 1 in 3 Americans nationwide.

While Blue Cross Blue Shield of North Carolina maintains non-profit status, that hasn't stopped it from posting hefty profits in recent years. In addition, the insurer faced harsh criticism last year during the economic downturn when it was revealed that in 2008, six top executives received salaries in excess of $1 million each, including a $3 million bonus for the then-CEO.

Now it appears that the days of soaring profits might be over. The Charlotte Observer recently reported that Blue Cross, in anticipation of health reform changes being rolled out during the next four years, announced plans to trim 20 percent of their administrative costs by 2014. These cuts may result in fewer North Carolina jobs and smaller reimbursements for providers.

Implications for health insurance in North Carolina

Providing medical coverage for approximately 3.7 million North Carolinians, Blue Cross is bracing for the increased costs that it expects due to health reform mandates such as expanding dependent coverage and limiting pre-existing condition exclusions. Rather than wait for 2014, when the big changes take place, the company is taking steps to streamline its budget now.

Among the ways Blue Cross plans to cut $200 million from its $1 billion budget are:

  • Eliminating open positions
  • Reducing its workforce through attrition and early retirement
  • Streamlining administrative operations
  • Reviewing real estate holdings for possible sale
While these changes are influenced by the impending federal reform, Blue Cross CEO J. Bradley Wilson warns that these are not temporary health insurance changes, saying that "over time, Blue Cross will be a smaller company." The announced job reductions come amid a slow economic recovery with state unemployment rates that have hovered around 10 percent. In addition, Blue Cross expects that revenue from its medical health insurance plans will grow by only 1 percent or less in the upcoming years.

However, it's possible that local employment may adapt to the changes at Blue Cross. According to the Charlotte Observer, quoting North Carolina State University economist Michael Walden, "There may be fewer jobs in insurers' offices, but employment will shift to hospitals, community clinics and other providers."

To combat the increasing cost of medical health insurance, Blue Cross plans to expand into new types of insurance offerings. The Charlotte Observer reports that Wilson hopes to have 25 percent of the company's future business come from non-health insurance services, including:

  • Life Insurance
  • Payroll Services
  • Workers Compensation Coverage
It's win some, lose some for Blue Cross customers

For North Carolinians still reeling from the 12 percent increase in their individual health plan premiums earlier this year, the proposed changes offer some hope that future increases in their health insurance rate will be more manageable. Blue Cross promises "tough negotiations" with hospitals and physician networks to make that happen.

That can be roughly translated to mean that providers can expect to receive smaller reimbursements from Big Blue. Although smaller reimbursements to health care providers may mean smaller premium increases, they can also result in reduced access to services for policyholders. For North Carolina residents, only time will tell how Blue Cross's cost-cutting measures will affect their quality of care.

At least it is not all bad news coming out of the Triangle Region. Some of Blue Cross's plans may provide added convenience and benefits. For example, the company is speeding up plans to put customer service representatives at Raleigh's largest hospital, WakeMed. The on-site support services will have the dual effect of making life easier for policyholders while also protecting the insurer's bottom line.

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