Premera plans to slash workforce 8%, seeking to offer more affordable health plans during pandemic

Oct. 14--Premera Blue Cross, one of Washington state's largest health insurers, will lay off 285 employees, or 8% of its 3,442-person workforce, starting Thursday because of economic fallout from the coronavirus pandemic, a spokesperson said.

The Mountlake Terrace-based not-for-profit insurer, which occupies 13% of the state's health insurance marketplace, is trying to cut costs with the goal of making health plans for individuals and groups more affordable, spokesperson Dani Chung said in an email.

"While Premera remains strong financially, we recognize the tremendous toll the global pandemic has taken on the economy and many of our group and individual customers," Chung wrote. "Unfortunately, the global pandemic and the subsequent impact to the economy has forced us to move beyond our normal efficiency and cost-saving efforts."

The layoffs come during a period of steep profits for the insurance industry. Many consumers have delayed nonemergency care during the pandemic, boosting insurers' profit margins. Publicly traded UnitedHealth Group, for instance, has seen share prices rise 50% in the last year.

Premera entered the pandemic with a surplus of nearly $700 million, after raising rates 19% in 2017 and 35% in 2018, Oregon Public Broadcasting reported in February. The insurer also counts among its clients two local tech giants that have seen record-breaking profits amid the pandemic: Amazon and Microsoft.

In response to questions about why Premera would lay off employees while its financial performance remains strong, Chung said that "affordability and lower costs are important to our customers, and Premera must continue to do all it can to meet that need and make healthcare more affordable."

Dean Polik, president of Seattle-based grocery distributor Acme Food Sales, scoffed at the idea that Premera is trying to make insurance more affordable. Premera's bill for health insurance for his 34-person company is slated to jump 60% in 2021, he said.

"To me, it was them saying, we don't want to insure you anymore," he said. "We're going to seek insurance with someone more affordable."

On average, the insurer raised rates 3.8% for small-group plans -- those serving companies with fewer than 50 employees -- in 2020, according to the state's Office of the Insurance Commissioner, and is requesting a 1.3% average increase for 2021. Rates for large-group plans, serving more than 50 employees, are negotiated between Premera and the employer. For individuals, Premera will decrease rates an average of 8.7% for 2021.

The insurer recently settled an alleged patient privacy violation with the federal Department of Health and Human Services for $6.85 million, the second-largest such settlement in history, after hackers infiltrated Premera's computer system. The names, addresses, dates of birth, email addresses, Social Security numbers, bank account information and clinical information of 10.4 million individuals were compromised in the 2014 breach.

The layoffs are unrelated to the settlement payment, Chung said.

Premera's cuts will affect "non-customer facing" roles; affected employees will receive severance packages and job placement assistance, Chung said.

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