New health insurers add Western Pennsylvania clients with caution

| Thursday, Jan. 12, 2012

Highmark Inc. is facing its first real competition in the Western Pennsylvania health insurance market.

But the extent to which that competition has resulted in lower costs for employers and lots of new business for four national, for-profit insurance companies has been limited so far, said Elliott Dinkin, CEO of Downtown benefits consulting company Cowden Associates Inc.

"They have their toes in the water, but they're cautious," Dinkin said of the approach to the market by Aetna Inc., Cigna Corp., HealthAmerica and United HealthCare.

The four companies for the first time last year could offer plans with full access to UPMC, but it's likely at the same cost as Highmark, Dinkin said on Wednesday at a meeting of the Western Pennsylvania Diversity Initiative in the City-County Building. If UPMC is charging the four nationals the same rates for medical procedures as it charges Highmark, the state's largest health insurer, then it makes competing on price difficult, he said.

Adding to the cautious approach is a fear that employers will use proposed rates from the competitors as leverage in negotiations with Highmark, Dinkin said.

Aetna, Cigna, HealthAmerica and United HealthCare "don't want to be quoting machines," he said.

There's also concern that state lawmakers will pass a law that forces a new contract between UPMC and Highmark, he said.

Dinkin's personal view is there won't be a new long-term contract. If Highmark can offer full access to UPMC's 19 regional hospitals and more than 3,000 doctors, then employers have less incentive to switch insurance carriers.

State Rep. Dan Frankel, D-Squirrel Hill, also spoke at the meeting yesterday and said afterward that he expects the General Assembly to take action, but he is not sure what the end result will be.

The state House has passed a bill that could require UPMC and Highmark to enter binding arbitration to resolve their contract dispute. The Senate is likely to take up a proposal from Sens. Don White, R-Indiana, and Jay Costa, D-Forest Hills, that would give the state insurance commissioner power to extend the current contract by up to three years.

Lawmakers eventually will hammer out a compromise between the two competing proposals, Frankel predicts.

Aetna and Cigna last month told the Tribune-Review each had recorded membership increases of about 20 percent, thanks to the expanded contracts. Their overall numbers remain very small compared to Highmark, which has about 60 percent of the health insurance market in Western Pennsylvania.

United and HealthAmerica declined to provide numbers for new membership.

UPMC Health Plan, the system's health insurance subsidiary, said it has about 1.6 million members, about half of Highmark's total in the region, and is growing at double-digit rates.

Highmark has said it maintained the same membership levels as a year ago.

Frankel, meanwhile, said that just as Highmark is facing competition, so should UPMC. Lawmakers from the region plan to press Insurance Commissioner Michael Consedine to speed his review of Highmark's planned $475 million acquisition of West Penn Allegheny Health System.

There must be a viable competitor to UPMC and greater transparency in pricing of medical procedures if cost increases here are going to be slowed, Frankel said.

The acquisition of West Penn Allegheny, he said, "is a good thing for our community."

Additional Information:

Health insurers in Western Pennsylvania:

Highmark Inc., Downtown -- 3.1 million members; no change

UPMC Health Plan, Downtown -- 1.63 million members; up 10 percent

United HealthCare, Minnetonka, Minn. -- 280,000 members; won't disclose change

Aetna Inc., Hartford, Conn. -- 105,000 members; up 23.5 percent

Cigna Corp., Philadelphia -- 89,000; up 18.7 percent

HealthAmerica, Harrisburg/Pittsburgh -- numbers not disclosed

Source: Insurers

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