ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, October 11, 1996 TAG: 9610110049
SECTION: BUSINESS PAGE: B8 EDITION: METRO
DATELINE: HARTFORD, CONN.
Aetna Inc. said Thursday it will close 30 health insurance claims processing centers and cut 13 percent of its work force as it reorganizes following this year's $9 billion merger with the health maintenance organization U.S. Healthcare.
The April merger created the nation's largest health insurance provider, serving 23 million customers.
Aetna, like some other traditional health insurers, is moving aggressively into HMOs and other managed care networks, which are increasingly demanded by corporate America as a way to trim health insurance costs for employees.
The company said it is moving away from a highly decentralized way of running its health care business, a system that had been favored by the old multi-line insurers, and shifting to a regional model successfully used by U.S. Healthcare and other HMOs.
``Aetna is not breaking new ground, they're mirroring trends that others have been following for a long time,'' said Todd Richter, a health care analyst at Dean Witter Reynolds in New York. ``The big multi-line companies were getting their clocks cleaned by the HMO industry.''
Under the restructuring plan, Aetna will cut the number of its primary service centers, the places where claims are processed, from 42 to about 12. The company will cut about 7,500 jobs by the end of 1998 in its health care division, now called Aetna U.S. Healthcare.
The jobs most affected will be claims processors and employees in systems operations, said Joyce Oberdorf, a company spokeswoman. New hires in sales and marketing will help offset the cuts, resulting in a net job loss of about 4,000 in the division.
Aetna's total work force now numbers about 33,700. An additional 400 jobs will be lost in Aetna Retirement Services, which was formed this year through the combination of several business units.
``They certainly indicated there would be changes,'' said Gary Frazier, a managed care analyst at Bear Stearns & Co. in New York. ``It might have caught some people by surprise in terms of sheer numbers.''
The new regional organization will answer complaints that large companies do not adequately meet the needs of some areas, he said.
``Having a nimble, entrepreneurial, region-specific service is efficient, because health care really is still very much a local business,'' Frazier said. ``There are certainly geographic differences that exist in the delivery of health care.''
The Citizens for Economic Opportunity, a Hartford coalition that sought to block the merger of Aetna and Blue Bell, Pa.-based U.S. Healthcare, said the job cut announcement was ``a tragic prophecy come true'' and vowed to continue fighting ``these outrageous acts of corporate greed and shortsightedness.'' Critics of the merger contend that as for-profit health care companies grow larger, they will increasingly give more weight to the interests of shareholders than those of patients. Aetna contends it is making the delivery of health care better and more efficient.
Under the new organization, Aetna U.S. Healthcare will have six regional headquarters, in Middletown, Blue Bell, Atlanta, Chicago, Dallas and Walnut Creek, Calif.
Aetna said it will take an after-tax charge of about $32 million in the third quarter to account for restructuring of Aetna Retirement Services, and a $275 million charge in the fourth quarter related to the reorganization of its health business. The costs include severance payments and asset writeoffs.
Aetna shares fell 87 1/2 cents Thursday to $66.87 1/2 on the New York Stock Exchange.
LENGTH: Medium: 70 linesby CNB