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Group Health Takes A Hit: Humana Latest To Announce Job Cuts

Little more than a month after Philly-based Aetna announced it would lay off an additional 1,250 workers after it issued a similar pink slip notice to 900 employees last November, Humana announced today it would be cutting 2,500 people from its payrolls after losing 11 percent of its enrollments in group health plans. The layoffs amount to about 5 percent of its workforce.

In making the announcement, Aetna president and CEO Michael McCallister said, “This regrettable but necessary reduction in our work force is a direct result of Humana’s need to align the size of our company with that of our membership.”

Humana said most of the cuts would come from attrition, outsourcing some of its business functions and not filling open positions, but told investors it expects to ramp up operations in Medicare and its mail-order pharmacy unit; both of which posted stronger financial results. For the quarter ending December, 2009, Humana posted a 44 percent profit, mostly attributed to growth in its Medicare business.

The move comes at a pivotal time for group health insurance companies, as leading economists and Wall Street analysts report that the U.S. economy is starting to show signs of job growth while Congress is scrapping its health care reform initiatives and starting over. Industry observers expect the U.S. government to introduce changes to the health insurance industry that would, in effect, make it more affordable for individuals to purchase individual and family health insurance policies directly from carriers and brokers. If passed, the change is likely to put an even larger financial dent in the group health insurance market.

Insurers that issue work-based health insurance plans have struggled over the past year to increase revenues, as the economic recession continues to wipe away jobs from the private sector. In addition to the job cuts at Humana and Aetna, other health insurance companies that specialize in group plans; such as CIGNA and Wellpoint, have eliminated more than 1,000 jobs in the past year. President Obama recently announced new banking and grant programs aimed at small business owners in hopes of staging a revival in the national job market.

Anthem Blue Cross of California, among other health insurance plans administered by Wellpoint, announced today it would cancel its previously announced investor conference that had been scheduled next Tuesday so it could prepare for a Congressional hearing prompted after the company said it would hike insurance premiums by 38 percent in May.

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