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Companies say health system reform is driving layoffs

Two large health plan operators say outside changes mean they must cut 2,500 positions.

By Emily Berry — Posted Sept. 4, 2009

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Kaiser Permanente and Health Care Service Corp. say declining membership and potential changes that will come with health system reform have pushed them to cut jobs.

Kaiser, which operates medical centers in several states, also runs the country's largest nonprofit health plan by membership, with 8.6 million members. HCSC is the parent company of BlueCross BlueShield-affiliated plans in Texas, Oklahoma, Illinois and New Mexico. Both announced layoffs in August.

Kaiser gave notice to 1,850 employees in California, about 1.3% of its total work force, that their positions were being eliminated. Positions eliminated included jobs at most, but not all, medical centers in California, according to a company statement. The statement did not specify whether the eliminated positions were mostly clinical or included jobs working for the health plan.

The statement said the company was working to place many of those employees in other jobs at Kaiser.

HCSC plans to cut 650 positions in Illinois, Oklahoma and Texas, equal to about 4% of its work force, over the next six months, spokesman Mark Lane wrote in an e-mailed statement.

Both companies cited the potential for health system reform and accompanying changes in the industry among the reasons for cuts, though they acknowledged that economic conditions were the primary reason for cutting staff.

But Lane's statement also said the economic recession had cost HCSC members, and had prompted its customers to demand reductions in administrative costs to keep premiums lower.

HCSC expects to save about $70 million in annual administrative costs from the layoffs, his statement said.

At least one policy expert doubted the companies are truly reacting to the possibility of reform.

"Since reform is so much in doubt -- will it happen and what would it look like -- it is hard to believe companies are already reacting," said Robert Laszewski, a former insurance executive and health insurance consultant based in Alexandria, Va.

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