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UPMC says it benefits from dispute with Highmark as companies switch insurers

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Saturday, Aug. 24, 2013, 12:01 a.m.

UPMC Health Plan, the second-largest health insurer in Western Pennsylvania, said it is benefiting from a contract battle with Highmark Inc. as companies switch insurers to avoid losing in-network access to UPMC hospitals and doctors.

It's a trend that UPMC needs to accelerate because Highmark plan members factor significantly into UPMC's hospital business. Highmark pays UPMC about $1 billion a year to treat its members, according to UPMC financial statements.

UPMC is blanketing the region's airwaves with advertising about the end of its contract with Highmark in an effort to win business. It could lose revenue because Highmark's plan members may no longer seek treatment at UPMC hospitals, which become out-of-network facilities and more expensive for them when the contract ends on Dec. 31, 2014.

The hospital giant said this week that its insurance arm, UPMC Health Plan, picked up 46,700 members over the past year, an 11 percent increase from the previous year, giving it 468,000 commercial members as of July 31.

Robert DeMichiei, UPMC's chief financial officer, attributed much of the growth to customers leaving Highmark.

“We see people switching,” he said.

Highmark spokesman Michael Weinstein said gains that UPMC reported are part of the normal ebb and flow of customers among insurers.

“That's part of the business cycle,” Weinstein said. “We pick up people from UPMC, and we lose them to other insurers.”

Highmark's customer retention rate for the past year was “well over 90 percent,” he said. “Our enrollment remains pretty strong.”

In the 12 months ended June 30, Highmark members accounted for 21 percent of UPMC's hospital and doctor revenue of $5.4 billion. UPMC Health Plan members contributed 9 percent.

Highmark, with about 2 million members in Western Pennsylvania, needs to keep members so it can fill beds in its hospital system, Allegheny Health Network.

UPMC argues it cannot renew a reimbursement contract with Highmark because the insurer will force patients to its own hospitals.

One former Highmark customer did not want to be caught in that position.

Schell Games, a South Side developer of video games and interactive videos for amusement park rides, switched to UPMC Health Plan at the start of this year.

Chris Arnold, Schell's general counsel and human resources director, said the company decided to quit Highmark because its 90 workers would have to pay more to access UPMC doctors and hospitals in 2015.

“I wasn't comfortable telling our employees that they weren't going to be able to use (UPMC) facilities,” he said.

Schell saved 2 percent, or about $5,000 a year, by signing up with UPMC Health Plan, Arnold said: “UPMC was very aggressive in pricing for our business.”

Elliot Dinkin, CEO of Cowden Associates, a Downtown benefits consulting firm, said more employers are exploring options to maintain in-network access to UPMC.

“People are much more willing to have a discussion about moving coverage,” Dinkin said, though he has not noticed a huge number leaving Highmark.

Even considering a switch is significant, he said.

“Before, when Highmark offered all the UPMC facilities and everything was open, there wasn't necessarily a compelling reason to switch,” Dinkin said. “Now, with all the uncertainty, they really have to start to address what the future will hold.”

Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or

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