Health insurer Highmark lost $318 million during the first half of 2015 on policies intended for the online marketplace that’s part of the Affordable Care Act, or Obamacare. That’s up from a $78 million loss during the same period last year.
Pittsburgh-based Highmark, which is also a major Harrisburg-area employer, attributed the loss to customers who turned out to be sicker, and in need of more medical care, than expected. Officials said that when Highmark set 2015 premiums, it had little previous claims experience with many of the customers who accounted for the unexpectedly heavy usage.
Highmark officials said premiums for Highmark plans sold on the exchange will rise by 25 to 30 percent for 2016.
Highmark covers about 375,000 people who obtained coverage through the online marketplace, also called the “exchange, which is more than any other Pennsylvania insurer. It has offered some of the lowest premiums in the country for popular coverage such as “silver” plans sold on the exchange.
Another possible factor in the low premiums set by Highmark for 2015 is intense competition with the University of Pittsburgh Medical Center Health Plan, which also offered some of the nation’s lowest rates.
In a conference call last week, Highmark CEO David Holmberg said Highmark remains committed to offering coverage in the online marketplace, although he also said it has become clear the insurer with have to manage those customers differently than its regular customer base.
Highmark also reported a $16 million loss during the first half of 2015 for its Allegheny Health Network, which has eight hospitals. Holmberg said turning around the former West Penn Allegheny Health System, which was in major financial distress when Highmark acquired it, is taking longer than expected.
Still, Holmberg said gains from Highmark’s investments, subsidiaries including those involved in vision care and re-insurance, and the recent merger with Blue Cross of Northeastern Pennsylvania, resulted in overall revenues which topped expenses by $221 million.
He further said Highmark has invested heavily in its hospital-based “centers of excellence” for areas such as cardiac care for the acutely ill. At the same time, it has invested in non-hospital facilities expected see growing demand as a result of the shift from inpatient to outpatient care.
Holmberg said “we’ve made some very smart investments” while acknowledging “there’s a lot of work to do.”
Highmark said it saw a 3.3 percent increase in inpatient volumes and a 3.1 percent increase in outpatient volumes at Allegheny Health Network compared to the same period last year.
Officials said 5.3 million people in Pennsylvania, West Virginia and Delaware had health coverage through Highmark as of the end of June, about the same as a year before. Highmark, which said it gained 264,000 members as a result of the merger with Blue Cross of Northeastern Pennsylvania, cited a 98 percent customer retention rate.
Date: September 9, 2015