Health care giants Highmark and UPMC Health Plan are fighting for market share in Pennsylvania, with each losing millions of dollars on Obamacare in 2016 and UPMC preparing for an ambitious reach into eastern Pennsylvania.
UPMC Health Options Inc. lost $55.7 million on the online government marketplace in 2016, according to newly released data, and Highmark lost $46.3 million during the same period. UPMC’s health insurance is sold in western and central Pennsylvania, while Highmark plans are sold statewide.
In a 2015 press briefing, UPMC President and CEO Jeffrey Romoff described the struggle between the two rivals as “two Goliaths in the ring.”
“No one is likely to get killed,” Mr. Romoff said, “just injured.”
Stinging from the losses, Highmark has shed Affordable Care Act members since 2016, pulled coverage in certain counties and stepped up case management to cut costs.
Now, the insurer is asking the state Insurance Department for an average 20 percent rate hike next year -- the highest in the state -- for Western Pennsylvania members who receive coverage through the online government marketplace as the insurer continues to try to stop the bleeding.
In rate hike requests released Friday by the Insurance Department, Highmark proposed raising rates for the online individual market by an average 19.65 percent, which is driven by losses in the business line statewide, said Alexis Miller, senior vice president, individual and small group markets. Including the increase, Highmark’s premiums were still in the lowest third tier nationwide.
By comparison UPMC Health Coverage asked for an average rate hike of 7.96 percent, under the average 8.8 percent individual market increase insurers sought statewide, according to the Insurance Department, which will release the approved rates in mid-October.
“We’re just a little bit upside down, but approaching break-even on a statewide basis,” Ms. Miller said. “I think we’ve turned around the financial performance of the business.”
She declined to quantify the losses Highmark is sustaining, but said a number of initiatives to reach a break-even point are showing early signs of success. Staffing primary care physician offices with nurse case managers, for example, has shown “some early dramatic results” in reducing costs, including a 46 percent drop in inpatient hospital admissions.
Highmark lost an average $1.6 million a day in 2015, paying $1.19 for member care for every premium dollar received from its Obamacare product line.
“Highmark has always been committed to this market and serving these members who have a lot of clinical needs,” Ms. Miller said.
When compared to commercial health insurance customers, Highmark ACA members have a 48 higher incidence of heart disease, 55 percent higher for cancer, and 26 percent higher for lung disease. The average individual ACA member at Highmark is older and enrolls with more chronic conditions.
Highmark has 18,000 ACA members in Western Pennsylvania, 65,000 statewide. In total, 506,000 Pennsylvanians have individual market coverage.
While Highmark looks to stem individual market losses, UPMC has plans for growth. Insurance sales have grown to comprise 46 percent of UPMC’s total operating revenue of $12.1 billion in fiscal 2016, with more room to grow with its planned affiliation with seven hospitals in the central and eastern parts of the state.
Meanwhile, Pennsylvania’s individual health insurance market is stabilizing, according to Insurance Commissioner Teresa Miller, with rate requests reflecting the annual trend in medical costs. But two possibilities could force rates up sharply: the federal government’s withdrawal of the cost-sharing reduction subsidies, which help consumers pay co-insurance, deductibles and co-pay fees; and the government mandate that everyone carry health insurance.
Congressional Republicans have discussed ending the subsidies and mandate as a part of repealing Obamacare.
UPMC attributed its lower rate hike request to sophisticated integration of its health insurance and health care provider arms. A member’s insurance claim for a prescription drug, for example, can be enough for an alert to be sent to the member’s primary care physician for a follow up, according to UPMC Chief Actuary John Wisniewski.
“There’s no one wonderful, shining bullet, other than we look at the data and make small improvements every year,” Mr. Wisniewski said. “That’s what’s going to change health care — information.”
First Published: July 21, 2017, 4:12 p.m.
Updated: July 22, 2017, 4:07 a.m.
