Health insurer Aetna said Wednesday it will cut 625 jobs immediately, or nearly 2 percent of its staff, and will make a similar number of cuts by the end of the 2010 first quarter due to the lagging economy and the potential impact of health care reform.
Hartford, Conn.-based Aetna trimmed 977 jobs last December and currently has about 35,500 people. Several other large insurers, including Indianapolis-based WellPoint Inc. and Philadelphia-based Cigna Corp., also have announced cuts.
Health insurers have faced growing financial pressure in the past few quarters as corporate job cuts have trimmed the number of people covered by employer-sponsored health insurance. Many insurers project enrollment losses will continue into 2010 as the unemployment rate is projected to keep rising.
"This is something that's just industry wide right now," said Edward Jones analyst Steve Shubitz, who follows several insurers.
Aetna, the third largest publicly traded managed care company, saw medical enrollment grow 8 percent in the third quarter to more than 19 million people. But it expects to lose 225,000 people in the fourth quarter and another 650,000 in the first quarter of 2010, spokesman Fred Laberge said.
Aside from employer job reductions, Aetna also expects to lose some customers due to an increase in prices, Laberge said.
Aetna Chairman and CEO Ronald A. Williams said in a statement the insurer has to prepare for "the impact that health care reform and regulatory changes may have on our business."
Congress is debating plans to reform the health care system to cover more uninsured people. The insurer doesn't know what to expect from the debate, but it does know insurance market reform and tax increases are likely in the near term, Laberge said.
"We expect that would put additional pressure on our profit margins and our ability to invest for growth," the spokesman said.
Aetna expects to make similar job cuts in the first quarter, but Laberge said the exact amount and timing haven't been determined.
Aetna will book a $40 million restructuring charge related to the current layoffs. It will disclose the financial impact of future layoffs when those decisions are made.
Most of the cuts announced Wednesday will be made in Connecticut, where the company is headquartered. The company said it isn't exiting any of its markets as a result of the job cuts, but does expect to consolidate field offices in some locations in order to lower real estate costs.
The insurer made its announcement after markets closed Wednesday. The stock then fell 5 cents to $29.16 in after-hours trading.
AP Business Writer Damian Troise contributed to this story from New York.