Regence BlueCross BlueShield is laying off 56 employees across four states, including 14 at its Commerce Drive office in Medford.
The news was delivered to employees from management Tuesday.
Another 30 BlueCross BlueShield employees will be transferred to a different division and have their previous duties outsourced. (Clarification: The details of this change have been updated.)
Regence said the move was necessary to keep the cost of its services competitive.
The move is expected to save millions of dollars in employee costs by contracting out some back office claims and membership duties to Cognizant Technology Solutions.
"It is a new world for the health insurance industry — a time of transformation — which brings challenges and opportunities for us all," Jared Short, president of Regence Insurance Holding Corp., wrote in a memo to employees.
The organization has 5,500 employees in Oregon, Washington, Idaho and Utah, including 240 in Medford.
In an email to claims employees, Scott Powers, vice president of insurance operations for Regence, explained the changes spurred by Affordable Health Care Act.
"As reform draws near, we continue to explore ways to reduce costs and improve quality and efficiency to create an economically sustainable health care system for our members — this means investing in some areas and reducing investments in others," Powers wrote.
"We are competing in a market where nearly every major health insurer in the country realizes significant cost savings and greater quality and efficiency by sending certain types of transactional work to service providers whose core competencies and IT systems are set up for fast and efficient processing."
Powers detailed what functions will be handled by Cognizant and then itemized the cuts.
"Today, we delivered the difficult news to 56 Claims coworkers that their positions are being eliminated and these transactional claims functions will be moved to Cognizant over the next few months," he wrote.
The additional 30 employees also will see their jobs shifted to Cognizant. The transition is expected to extend several months and employees were told they would be given 30 days notice prior to their layoffs, severance packages, and career transition training.
One employee, requesting anonymity, said some supervisors were among those affected by the change.
"We understand how difficult change can be, especially on the heels of many changes over the past few years and particularly when it affects our own Regence team members," Powers wrote.
Cognizant has headquarters in Teaneck, N.J., has 150,000 employees and operations centers in 50 global locations. It works with 16 of the top 20 health insurers in the U.S., Regence said, and will handle specific BlueCross BlueShield claims and individual membership transactions.
Short called Cognizant highly flexible, allowing his company to be agile and responsive in the Individual marketplace.
"Actions we take to improve our operational performance often require difficult tradeoffs," he wrote. "Because these types of actions have a direct effect on our coworkers, we do not take this decision lightly."
Regence Group, which includes Regence BlueCross BlueShield, changed its name to Cambia Health Solutions in November 2011.