For the second year in a row, Pittsburgh-based insurer and hospital network Highmark Health reported a systemwide operating loss across its various business lines.
But the company also reported a revenue increase of nearly $1 billion, from $15.79 billion in 2013 to $16.75 billion in 2014, and a $365 million improvement within its hospital system.
Much of that 2014 revenue increase was due to having hospitals in its health network for a full year; at the beginning of 2013, the Allegheny Health Network did not exist, meaning the hospitals did not produce a full year of revenue until last year.
In its unaudited report, issued Wednesday, Highmark Health — the parent company of Highmark Inc., which runs the health plan, and Allegheny Health Network, the seven-hospital provider system — reported an operating loss of $178 million, and a bottom-line continuing operations deficit of $83 million.
Highmark’s book of health insurance business, which accounts for two-thirds of the consolidated company’s total revenue, essentially broke even in 2014. Karen Hanlon, Highmark’s chief financial officer, said the break-even performance represented a “substantial but expected” drop from the $309 million in health plan revenue reported in 2013.
Highmark’s overall 2014 numbers could be buoyed, the company says, if it gets an expected financial boost from the federal government. Because Highmark sells individual health plans on the Affordable Care Act’s HealthCare.gov marketplace, the company is eligible for risk-mitigation funds built into the ACA. The funds are meant to take some of the uncertainty out of selling policies in an untested individual market, and help prevent major health carrier losses in the first few years as the market is established.
Last year was the first year those ACA policies were sold in the HealthCare.gov marketplace. With the “risk corridor” cash added to the mix, Highmark Health’s 2014 operating performance improves by $155 million, but the company is still expecting an operating loss of $23 million.
Highmark’s decision to not account for that cash — other insurers made the same decision — was made based partly on rumors that Congress might not make the risk corridor payments. While the risk-mitigation programs were built into the 2010 health law, it’s still up to Congress to explicitly issue those appropriations annually.
Highmark Health is also reporting a systemwide cash surplus of $5.4 billion, and said in a press release that its for-profit Diversified Businesses unit — which includes its vision, dental and reinsurance subsidiaries — reported 2014 operating income of $243 million, up from 2013.
During a phone-in press conference, Highmark Health CEO David Holmberg said Highmark’s vision unit had one of its best years ever, on the strength of its retail eyewear chain, Visionworks. Visionworks outlets are now in 40 states, with plans to move into Michigan and New York City this year, Mr. Holmberg said.
The CEO said that while the Pittsburgh market continues to be hypercompetitive, given ongoing jousting with UPMC and the membership losses in Western Pennsylvania, Highmark hopes to offset those losses by adding members through the federal marketplace and through its purchase of Blue Cross of Northeastern Pennsylvania, which should close this year and will add 250,000 new customers.
Highmark is also expanding its Medicaid portfolio into West Virginia and Delaware.
Date: April 1, 2015