SIOUX CITY | Citing concerns about the new federal health insurance law, Wellmark Blue Cross/Blue Shield said Wednesday it will shutter its First Administrators office in Sioux City, eliminating 106 jobs.
The closing, scheduled for early 2014, comes a year after First Administrators, or FAI, completed a major renovation of the offices at 1201 Zenith Drive and nearly doubled its workforce. At a ceremony in July 2012, Mayor Bob Scott presented the company with the city's "Growing Sioux City Award."
FAI, a Wellmark subsidiary, is a third-party administrator that processes medical and dental claims for self-fund customers in Iowa, South Dakota, Wisconsin, Nebraska and Minnesota.
Those functions will be integrated into the Wellmark system, with the work consolidated at the Wellmark offices in Des Moines, where the company is headquartered.
Wellmark, Iowa's largest health insurer, attributed the decision to the "ever-increasing number and complexity of federal regulations, mandates and the rising costs associated with these changes." Major provisions of the Affordable Care Act, which revamps the nation's health care system, take effect next year.
After a "thorough review," Wellmark concluded it was "simply not cost effective" to modify the FAI Information Technology system to meet the new rules and regulations.
All but 11 of First Administrators' 117 employees are based in the Sioux City office. It also has locations in Sioux Falls and Rapid City, S.D.
"These are hard decisions. They are not decisions we make lightly," Wellmark spokeswoman Courtney Greene said Wednesday. "The employees ... have done an outstanding job."
Displaced employees can apply for positions at the other Wellmark offices and can get relocation assistance, Greene said. Workers who don't transfer will be eligible for a variety of career counseling and job placement assistance. Iowa Workforce Development and the South Dakota Department of Labor and Regulation is collaborating with the company.
Sioux City Economic Development Director Marty Dougherty said city officials, who spoke with the company Wednesday morning, are "very disappointed" with the decision to shutter the office.
"With any situation like this, our thoughts are first with the employees," Dougherty said. "We certainly will do all we can to help them in any way we can."
With metro Sioux City's unemployment rate at a five-year low, Dougherty said he is optimistic that workers will catch on with other local employers.
A year ago this month, the city feted top company officials, including Wellmark Inc. President and CEO John Forsyth and FAI President and CEO Phil Davis, at the newly remodeled offices. During the ceremony, Forsyth spoke in glowing terms about Sioux City and the local employees.
FAI was awarded $700,000 in Targeted Jobs Tax Credits for a nearly $3 million project that included the creation of 50 new jobs and renovations to its 34,000 square feet of space in its building, located near Hamilton Boulevard and Interstate 29. The improvements included ergonomic furniture and a wellness center outfitted with exercise equipment.
According to city data, the company has collected about $300,000 in state tax credits from the Targeted Jobs program, which helps Sioux City and other border cities in Iowa compete with neighboring states, so far. A number of the new workers in Sioux City transferred from FAI's Rapid City office.
Wellmark, which has operated in Sioux City for more than 65 years, did not say what it intends to do with its Zenith Drive property.
"We'll certainly do anything we can to market that space and bring in additional jobs," Dougherty said.