Highmark CEO optimistic that UPMC deal will attract more patients to Highmark plans

Aug. 9--Highmark Health CEO David Holmberg said Thursday he's "cautiously optimistic" that more Western Pennsylvanians will choose Highmark insurance products now that the nonprofit system has inked a 10-year contract with rival UPMC.

Since striking the deal in late June, Highmark officials have been observing an uptick in interest from people who want to join or return to Highmark and Blue Cross/Blue Shield insurance plans during the 2020 enrollment periods that start in coming months, according to Holmberg.

"The response in the first few weeks of this has been phenomenal," Holmberg told the Tribune-Review. "The artificial barrier has been removed, and now consumers can choose and do what's in their best interest. We're seeing a lot of interest in people planning to have that blue card in their pockets so not only are they taken care of locally, but they also are taken care of when they travel across the country."

Last year, many seniors and cancer patients reported switching away from Highmark and choosing plans offered by UPMC or national alternatives such as Aetna to avoid a prepay-in-full rule at most UPMC hospitals starting as soon as last month. With the deal, the controversial prepayment rule was dropped, just six days before it was set to take effect.

Highmark insurance enrollment down by 200K

As of June 30, Highmark reported a total of 4.4 million insurance members in Pennsylvania and other states. That's 200,000 fewer members than the system reported the same time last year, records show. Its overall retention rate fell slightly, from 97% to 95%.

In Western Pennsylvania alone, Highmark's Medicare Advantage enrollment dropped by 21,000 members last year while competitors UPMC and Aetna enrolled thousands of new members.

The privately negotiated, 10-year agreement between Pittsburgh's competing health care behemoths preserves access to doctors and hospitals within both UPMC and Highmark for more than 1 million people in the region. It also ensures that everyone will have access to emergency care.

Nonemergency access to both systems will not be guaranteed, however, for another 300,000 Highmark patients on narrow-network plans.

The deal, which allows each system to continue offering narrow-network plans that exclude the other, followed months of bitter legal battles pitting UPMC against Highmark and Pennsylvania Attorney General Josh Shapiro.

RELATED: UPMC, Highmark reach 10-year deal for patient coverage

Holmberg said the contract, which has not been made public, "creates a more level playing field that fosters competition" and "marks a significant step forward for our region."

"We've delivered on our promise to build a better integrated health care system to meet consumer demand," Holmberg said. "As a result, people are staying with us and moving to us. This will not change."

Holmberg discussed his positive outlook about making enrollment gains shortly after Highmark Health released its mid-year financial performance updates.

Net income up, operating gains down

Highmark Health, the parent company to Highmark's insurance arm as well as Allegheny Health Network's hospital and doctors system, reported a total of $629 million in net income during the first six months of this year -- a 14% increase from the first half of 2018.

The system also reported $410 million in operating gains. That's $92 million less than the same time last year, for an 18% decline, financial documents provided by Highmark Health and shared with state insurance regulators show.

RELATED: Highmark executives tout steady growth, momentum, $551M in net 2018 income

Holmberg attributed the drop in operating gain to "very purposeful investments," including lowering costs for consumers and investing in data-driven decision making.

"We've had 2 1/2 years of really strong results, and we made a strategic decision that we were going to make investments in lowering premiums where we could," Holmberg said.Also, we've made significant investments in technology, specifically in data analytics and technology that gives us advanced insights into the future.

Holmberg said a high priority will be focusing on innovation and changes that benefit patients. He noted AHN's popular same-day appointment service, improved electronic health record-sharing, and construction of new community-based centers that make getting care more convenient.

Recent investments have spanned four new neighborhood hospitals, five new cancer care centers, renovated emergency departments, expanded women's health services and a new academic center at Allegheny General Hospital in Pittsburgh's North Side.

Highmark anticipates that about 200 active construction projects will create 800 health care jobs and as many as 10,000 related construction and trade jobs.

"We plan to move full-speed ahead by continuing to invest and grow Allegheny Health Network to meet the needs of patients in the region, Holmberg said.

The system's bottom line of $629 million in net income -- up $78 million from last year -- was bolstered by about $200 million from the performance of investments in stocks and bonds, said Karen Hanlon, Highmark Health's chief operating officer.

"The way I look at it is sort of like your 401k -- markets go up and markets go down and it's just recognizing those gains and losses," Holmberg said of the hefty amount of unrealized gains. "It's less indicative of performance, but it's certainly nice that the markets have been up."

The June sale of Highmark's eye care company, Visionworks, also provided an infusion that will free up capital for Highmark's investments and growth, Hanlon said.

Total revenues for the first half of 2019 amounted to $9.2 billion.

Highmark Health's net assets now top $7.4 billion.

The nonprofit integrated financing and delivery system has been operating in the black for more than two years.

"We're reporting positive operating margins for nine consecutive quarters now, indicating that families and individuals in Western Pennsylvania are choosing the high-quality, affordable services that Allegheny Health Network provides," Hanlon said. "We have achieved the operational flexibility to execute, we have a diverse set of assets to leverage, and we have the financial resources to invest when and where we identify need and opportunity so that we can conitnue to lead the much-needed change in health care."

Natasha Lindstrom is a Tribune-Review staff writer. You can contact Natasha at 412-380-8514, [email protected] or via Twitter .

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