Blue Cross Blue Shield of Michigan looks to cut $300M in expenses

Blue Cross Blue Shield of Michigan's plans to cut $300 million in expenses by 2018, which could lead to a reduction in its workforce, according to an article from Crain's Detroit Business.

Despite the fact that BCBS of Michigan and its related subsidiaries have now grown to almost 8,000 employees in the past six years, those acquisitions and mergers initially led to a reduction of nearly 1,000 workers through various channels, including attrition, layoffs and retirements, which reduced the workforce to about 6,900. Additionally, the Crain's article explains that because of a variety of factors, Blue Cross' discounts from hospitals aren't as deep as they used to be.

According to Jerry Konal, Mercer's principal business leader in Detroit, a large variance exists in BCBS of Michigan's administrative service costs as compared with those of competitors. The insurer says its overall administrative costs are "20 percent to 30 percent higher than local competitors in the commercial business. For example, the company's monthly administrative costs per member increased 27 percent from 2010 to 2013, or from $27.63 to $35.04; its membership increased only 0.4 percent during that period, to 4.4 million members.

Still, Andy Hetzel, who is vice president of corporate communications with BCBS of Michigan, said in the article that the company is conducting an ongoing business review of operations, and is still looking to expand while streamlining its cost base and growing revenue through different types of business ventures.

This August, BCBS of Michigan announced that it had saved $1.4 billion in health expenses over the last 10 years with its comprehensive value-based payment program that serves almost 2 million members.

According to Crain's, Blue Cross is also in talks with the nonprofit Arkansas Blue Cross Blue Shield about a partnership plan for Medicare Advantage, and is expecting to develop other similar partnerships with Blues plans nationally. In October, the national Blue Cross Blue Shield Association announced that it will make 450 local, value-based care programs available to multi-state employers in an attempt to save it more than $840 million annually, compared to traditional payment models.

To learn more:
- here's the Crain's Detroit Business article

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