Health plans cut jobs in response to declining economy

Cigna, Aetna and UnitedHealth Group all have announced layoffs.

By Emily Berry — Posted Jan. 21, 2009

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Health plans are announcing that they have to lay off employees because of stalled revenue and profit caused, in part, by other corporate layoffs that have reduced the number of customers in group plans.

Three of the seven major publicly traded health plans have announced work force reductions in the thousands since July 2008.

Cigna, based in Philadelphia, announced in January it would eliminate 4% of its employees, or 1,100 jobs.

Aetna, based in Hartford, Conn., announced in December 2008 that it would eliminate about 1,000 jobs. Spokesman Fred Laberge said Aetna has actually had a net growth in jobs over the past 18 months, and said the cuts weren't concentrated in any one area. "We are committed to adding jobs and investing in businesses or geographic locations that offer revenue growth opportunities," he said in an e-mailed statement.

Minnetonka, Minn.-based UnitedHealth Group planned to cut 4,000 jobs by the end of 2008 -- about 5% of its staff. The company's head of operations, Dave Wichmann, called the measure "right sizing," and said the cuts were a response to "growth that didn't materialize." Most of the cuts were in sales and local service, he told industry analysts in July 2008, when about 2,000 jobs were eliminated.

In the short term, Cigna and Aetna reported they would have to pay millions of dollars in severance and "restructuring costs," but all of the insurers said the layoffs were necessary to grow or maintain profits.

"Given the unprecedented economic situation we and our customers are facing, these actions are essential to ensure we can meet their needs for high value, cost-effective products and services," Cigna Chair and CEO H. Edward Hanway said in a statement.

Companies that subsidize health insurance for their workers are eliminating employees, health benefits, or both, and in turn income is dropping for health plans. Net income for most of the largest health plans dropped in the third quarter of 2008, compared with the like period in 2007, in the face of declining revenue from employer-sponsored insurance.

Health plan officials insisted that the job eliminations wouldn't affect communication or services to physicians or members, even suggesting that cutting jobs would improve service.

"The new structure will improve the speed, efficiency and cost of doing business with Cigna," spokesman Chris Curran said.

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