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Highmark eliminates more than 100 jobs across Pennsylvania

| Wednesday, March 12, 2014, 3:51 p.m.
Pittsburgh Tribune-Review
The Highmark and UPMC buildings, Downtown.

A sign that Highmark Inc. is not immune from the pressures of America's rapidly evolving health care business — mounting layoffs.

The state's largest health insurer, which operates seven hospitals in Western Pennsylvania, laid off 100 workers from its health plan operations on Wednesday. That brings the total job losses at Highmark's insurance and hospital businesses to more than 520 in the past eight months.

“Health care is changing rapidly,” spokesman Aaron Billger said of the latest layoffs at the insurer. “We are transforming health care in our markets, and our workforce needs to be aligned to our strategies.”

Highmark faces competition in its core insurance business that has forced it to drop the price of some of its health plans to attract customers. Its hospital system is pressured by a general push nationwide to lower health care costs.

“It's a challenging operating environment that they're in,” said Jon Reichert, a Standard & Poor's analyst who last week downgraded Highmark's credit rating.

Highmark's challenges include a years-long contract battle with UPMC that threatens to reduce its insurance subscribers, turning around West Penn Alle­gheny Health System's finances and keeping credit-rating agencies satisfied that it will be able to pay back its $1.2 billion in debt.

The company has said it is financially strong and is prepared to weather the changes. But its most recent financial report demonstrated the squeeze on its bottom line. It showed net income fell 45 percent to $246.5 million in 2012, from $444.7 million the year before.

The layoffs on Wednesday, which include 40 positions in Pittsburgh, underscore efforts the nonprofit Blue Cross Blue Shield company has taken to streamline its business. The company last month laid off 160 in information technology, sales and finance. Its hospital system, Allegheny Health Network, laid off 262 last year and an unspecified number last week.

Highmark employs 20,000 people in its insurance business, including about 5,000 in Pittsburgh. Allegheny Health Network employs about 17,000 people.

Reichert said that the company's surplus of $4.4 billion gives it a solid foundation, but its profit will be reduced because it is cutting premium prices to hold onto membership. The company's premiums on the insurance exchanges set up under the Affordable Care Act are the lowest in the state. It introduced a discounted health plan, Community Blue, for individuals and companies in 2013.

“The major pressure point on their financial performance is the pricing they put in place,” Reichert said.

Billger said the insurer's pricing strategy is working. He said that it retained 95 percent of its members in January and added nearly 36,000 subscribers from large national companies this year. It has picked up more than 130,000 members through the federal Affordable Care Act health law in Pennsylvania, Delaware and West Virginia.

In Western Pennsylvania, UPMC Health Plan and three national insurers — Aetna Inc., Cigna Corp. and United Healthcare — could eat away at Highmark's dominance of the health insurance business when its members lose in-network access to most UPMC hospitals and doctors next year.

UPMC, which runs the largest network of hospitals and physicians in the region, has refused to grant Highmark a reimbursement contract since the insurer purchased West Penn Allegheny and other hospitals to establish Allegheny Health Network. UPMC has said it won't contract with a competitor.

Absorbing the beleaguered West Penn Allegheny adds to its challenges. West Penn Allegheny lost tens of millions of dollars a year as patients switched to UPMC. Highmark is trying to reverse that trend. In the October-December quarter, the system's operating loss was $2.1 million, reduced from a loss of $33.1 million in the same quarter the year before.

Thursday's layoffs also include 40 jobs in Camp Hill and more than 20 at other regional offices, Billger said.

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

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