TribLIVE

| Business

 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

UPMC expects insurance inequity

Email Newsletters

Click here to sign up for one of our email newsletters.

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

Related .pdfs
Can't view the attachment? Then download the latest version of the free, Adobe Acrobat reader here:

Get Adobe Reader

'American Coyotes' Series

Traveling by Jeep, boat and foot, Tribune-Review investigative reporter Carl Prine and photojournalist Justin Merriman covered nearly 2,000 miles over two months along the border with Mexico to report on coyotes — the human traffickers who bring illegal immigrants into the United States. Most are Americans working for money and/or drugs. This series reports how their operations have a major impact on life for residents and the environment along the border — and beyond.

Thursday, Nov. 7, 2013, 12:01 a.m.
 

Health care giant UPMC has signed up few people for the policies it is selling in the federal online marketplace because of glitches with the website.

But once the website is fixed and more people begin to enroll for so-called Obamacare coverage, UPMC Chief Financial Officer Robert DeMichiei predicts another challenge: Many of the customers who sign up in the first year will be the sickest and in most need of insurance.

The insurance giant and others participating in the exchanges need a balance of healthy young people to help offset the risk of potential claims it will have if the number skews toward the sickest. That is an added problem for insurers already facing a financial squeeze.

The health system, which gets roughly half its revenue from its hospitals and doctors, and the other half from its health insurance business, has seen its operating profit decline year-over-year for four successive quarters because of the push to lower health care costs.

“We're managing our way through the turbulent times,” DeMichiei said.

Health insurers may raise premiums in later years to make up for losses in the first year, said Stephen Foreman, a health economist and Robert Morris University associate professor. When only people with chronic illnesses buy health plans, the result is something economists such as Foreman call adverse selection.

“If you get a fair amount of adverse selection ... the insurer will lose money in the first year and then they'll raise premiums,” he said.

DeMichiei, who met with reporters Wednesday to discuss UPMC's financial results for the July-September quarter, wasn't specific about how many people have enrolled in plans through the government's website, only saying there has been very little activity.

Asked later to clarify, UPMC Health Plan CEO Diane Holder responded that there had been enrollments, “but we are not disclosing the numbers at this stage.”

UPMC Health Plan likely isn't the only insurer that's getting little activity. The website that's serving uninsured people in 36 states has only recently started allowing shoppers to create accounts and explore their plan options.

Obama administration officials testified before Congress this week that many of the problems were being ironed out and they expect 800,000 people to buy plans by the end of this month. An estimated 7 million people have been predicted to buy coverage by March 31, when this year's enrollment period ends.

DeMichiei said UPMC expects that once the website is working enrollments “should heat up,” but then it will likely be a “slow transition” in balancing out sick and costly customers who are the first to sign up with healthier people who may delay their decision to buy coverage.

UPMC reported declining operating profit in the first quarter of its fiscal year that ends June 30.

The health system posted $54.3 million in adjusted operating profit, down from $72.3 million in the same quarter last year. Profits at UPMC, as at many health systems in Western Pennsylvania, are being squeezed by reduced reimbursements and higher expenses.

UPMC is gaining patients and new insurance members, which led to a boost in revenue in the quarter of 15 percent to $2.8 billion.

Net income jumped 63 percent to $293.7 million, up from $180.2 million, on strong investment income and a $120 million one-time, non-cash gain associated with UPMC's July 1 acquisition of Altoona Regional Health System.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

Add Alex Nixon to your Google+ circles.

Subscribe today! Click here for our subscription offers.

 

 

 


Show commenting policy

Most-Read Business Headlines

  1. Pitt to start Energy Law and Policy Institute
  2. Stocks in slump as Chinese shares plunge
  3. Israel’s Teva drops bid for Mylan, buys Allergan for $40.5B
  4. Plummeting natural gas prices slash revenue of Marcellus shale producers
  5. Wabtec moves to buy France-based transport company
  6. Invasive beetle costs Pittsburgh-area power companies plenty
  7. What to do with a toxic worker
  8. Chronic job-seekers giving up the hunt
  9. Muni bond funds stressed
  10. Urban rentals pit old vs. young
  11. Bayer sets sights beyond aspirin