Highmark Moves Ahead On Outsourcing

Dec. 10--Highmark Inc. has asked some of its employees to be observed this week by outsourcing specialists who will determine which of their job responsibilities can, and will, be sent overseas in the coming year.

Downtown-based Highmark, the state's largest health insurer, has been internally debating which of its back office, enrollment and tech positions to outsource since 2009. Earlier this year, the company began off-shoring some technology work to India through an overseas work center run by Houston-based Accenture.

This new round of outsourcing talks involves IBM, the American tech and computer company. It has an outsourcing subsidiary in India, called IBM India, as well as its newly re-branded international business outsourcing unit, IBM Global Process Services.

According to Highmark employees, the IBM scouts are, at least for now, tailing "business operations" workers whose jobs involve enrollment and membership responsibilities, among others. (When a new customer signs up for a policy, for example, the particulars of that policy must be keyed into a computer database.)

Highmark spokesman Michael Weinstein said IBM scouts would be in Pittsburgh for the next few weeks. "They have the expertise to best identify where the significant savings may lie," he said.

He said "direct interaction" jobs -- employees who field phone calls from the public, for example -- are not among those being considered for outsourcing to IBM.

One Highmark employee, who declined to be identified in this story for fear of losing her job, said employees at the company's Downtown headquarters were rattled.

"I am so worked up at my desk. I was sitting up there crying," she said.

She also said some employees considered it insulting that they were being observed by representatives of the very company that will be asked to replace some of their job functions.

"We were all appalled," she said. "That's like adding insult to injury."

That sort of arrangement -- having an outside consultant review the workplace and observe workers -- is typical when companies are considering downsizing or outsourcing.

Managers have told employees that the reviews are ongoing, and that the company would like to complete the review and outsourcing process by the third quarter of 2011.

IBM also sent consultants to Highmark'sWest Virginia affiliate, Mountain State Blue Cross Blue Shield, on a similar scouting mission. County commissioners in Parkersburg, W.Va., sent a letter to Highmark, asking it to reconsider outsourcing West Virginia jobs to India, according to the Parkersburg News and Sentinel.

Contacted by phone, Mountain State President J. Fred Earley directed questions to Highmark'sPittsburgh offices.

Highmark is one of the region's largest employers, with 10,000 employees in the state and 20,000 across the country.

For an operation that size, outsourcing certain office functions is not unusual and the savings accrued can be substantial. Foreign workers stationed in developing countries, such as the Philippines or India, can often do similar work at one-sixth the cost of a U.S. worker.

Other industries recognized this -- or at least put it into practice -- before health insurers did, for a variety of reasons, said Miami University (Ohio) economics professor Melissa A. Thomasson . The biggest reason is that health insurers have been able to survive the past few decades without the intense cost pressures experienced by companies in other sectors.

"They haven't faced a lot of competition," she said. "The industries that have faced a high level of competition" realized sooner that office and computer work could be outsourced.

A survey conducted last year by Insurance Dialogue, a Michigan business process outsourcing company, suggested an increasing reliance on outsourcing among health insurers; 27 percent of respondents said they planned to increase amount of operations work outsourced in 2010. Only 9 percent of those surveyed were considering a reduction.

Some local legislators have suggested that Highmark, as a not-for-profit, charitable organization based in Pennsylvania, has a special duty to preserve its Pennsylvania jobs.

Highmark, though, says the need to shave administrative costs is paramount in order to compete with national, for-profit insurers, and especially in light of coming changes to the industry, precipitated by the March 2010 federal health care overhaul.

Some of the pressures created by that law will be competitive -- jostling in a retail market for would-be customers looking for coverage via health insurance exchanges, for example. Other pressures are regulatory, such as new national standards for medical loss ratio.

"We've got to succeed, both short-term and long-term, to retain and grow business, in a very challenging health care environment," Mr. Weinstein said. "If we can do those things, we can actually create more jobs in our core markets."

He also noted that, while the company doesn't yet know how many positions will be affected by the outsourcing, Highmark has created new 150 customer service jobs this year, and will continue to create jobs at its retail and vision outlets.

In the 14 years since the Blue Cross-Blue Shield merger that created Highmark, the company has grown by 11,000 employees, many of those jobs located in Pennsylvania.

Bill Toland : [email protected] or 412-263-2625.

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