MONEY

Humana job cuts were part of plan if merger failed

Grace Schneider
@gesinfk

Executives at Louisville-based health insurer Humana and its rival Aetna made backup plans, including changes to reassign and cut employees, in the event their $37 billion acquisition tanked.

The Humana Waterside Building in downtown Louisville. March 1, 2017

In fact, a few weeks before the announcement Feb. 14 that the rivals mutually agreed to break up, Humana cut 500 positions in its At Home division. And this week, officials confirmed that they intend to trim an unspecified number of positions while adding roles that fit more closely with the company's latest growth strategies. It's part of the blueprint for moving ahead as an independent company.

"I'm sure they had a Plan B and I'm sure that's what they're implementing from" now, said Robert W. Klein, an associate professor and an authority on risk management and insurance at Georgia State University.

Klein and fellow Georgia State professor William Custer prepared an analysis of Kentucky's health insurance markets after Aetna applied to state's insurance regulators for approval to acquire Humana.

Employees told the Courier-Journal shared details anonymously because they weren't authorized to discuss job cuts. The changes involve eliminating positions, including those in supervisory roles, and folding some operations together. For instance, previously separate Wellness and go365 groups are being folded into a new organization, spokeswoman Kate Marx confirmed Thursday.

►RELATED: Humana eliminating jobs in Louisville

►READ MORE: Ali Jr.: 'I wasn’t terrorizing anybody'

►SEE ALSO: Old Kaelin's site prepping for reopening

The revelations about cuts and the realignment came within a week after 10 senior executives and three company board members, CEO Bruce Broussard, had sold blocks of shares totaling about $75 million – something they couldn't do as freely while the Aetna deal was pending.

Klein said that announcement that the company would withdraw from Affordable Care Act public exchanges by 2018 wasn't a surprise, given the multi-million dollar losses Humana and other insurers have suffered while offering health coverage to a sicker than usual pool of customers. "They're just getting really hammered by the risk" realities under the law. The fact that offering coverage didn't allow for the usual "risk-based pricing" meant that companies would take a hit when a disproportionate number enrollees have been sicker and more costly to care for, Klein said.

The loss of the ACA business, known as Obamacare, will mean that some lower-level employees working in call centers and claims processing likely will lose their jobs. But if the company grows its Medicare Advantage segment, as it intends, those with skills to transfer to other jobs will have an opportunity, he said.

The researcher also that "flattening the hierarchy is common. You see this happening in other sectors of the insurance industry."

Humana said last month it would intensify its focus on its employer group business and work to forge relationships with new Medicare enrollees. Its plans also include expanding primary care clinics.

Reporter Grace Schneider can be reached at 502-582-4082 or gschneider@courier-journal.com.