In an effort to counter losses from the state’s insurance exchange, Blue Shield of California will trim administrative costs by extending the Labor Day weekend by four days. Most of the insurer’s 6,000 employees will be affected.
The company is providing health coverage to many members “well below our cost, and this situation is not sustainable over the long term,” spokesperson Clinton McGue tells The AIS Report. “As a result, we are identifying areas to reduce administrative costs. One of the ways that we are doing this is by implementing a Labor Day week shutdown.” The shutdown, he adds, will not impact customer service or business continuity operations.
Blue Shield has among the highest expense margins of any Blues plan, according to a report issued early this year by Fitch Ratings. In 2015, the company’s general administrative expense ratio was 15.8%. Only Blue Cross Blue Shield of Michigan had a higher percentage. For the week of Sept. 5, employees will be required to use vacation days for the time off. The Blues plan will save an estimated $4 million by reducing the paid vacation time on its books, which is paid out in cash when employees leave the company.
“It’s not surprising they see a need to cut costs. But this is hardly a strategy, and certainly not one that justifies the million-dollar-plus salaries of Blue Shield’s senior executives,” says Michael Johnson, Blue Shield’s former public policy director, who resigned in March 2015 and began a campaign to pressure the insurer to convert to for-profit status.
McGue says the company is still trying to determine how many employees will be affected.
The San Francisco Business Times reported that the move was expected to impact most of the company’s 6,000 employees in California, except about 1,000 who work for Care1st, which the Blues plan acquired last fall for $1.2 billion.
Date: September 09, 2016