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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

4,400 To Lose Jobs In Sweeping Aetna Reorganization Health Insurer Also Plans To Close 30 Claims Processing Offices

Christine Hanley Associated Press

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.

Aetna 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 by combining several business units.

“In terms of the aggressive restructuring and changes in the head count, it’s all been pretty much expected. 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.”

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.