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Highmark's gains from Obamacare to come at a cost — perhaps a $2.9M one

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Thursday, April 3, 2014, 11:18 p.m.

Highmark Inc. gained 104,000 members through the Affordable Care Act's online exchange — far more than any other insurer in Western Pennsylvania.

But that boost in business has a cost.

The state's largest health insurer expects to lose $2.9 million on its exchange business in Pennsylvania from July 1, 2014, to June 30, 2015, according to a filing with the state Department of Insurance.

It is the most recent insurer to acknowledge that an influx of older, sicker people into its plans will cause it to lose money. National carriers Aetna Inc., Cigna Corp. and Humana Inc. in February projected losses from their exchange plans.

The health reform law, President Obama's signature domestic achievement, prevents insurers from denying coverage to people with pre-existing medical conditions. As a result, many people signing up are expected to be costly to insure.

About a quarter of enrollees nationwide are ages 18 to 34, the Obama administration has said.

Insurers such as Highmark can recoup some of their losses from the government. The Affordable Care Act established three programs meant to assuage the fears of carriers that they would lose money on the exchanges because it was difficult to predict how much it would cost to cover the newly insured, and because the law's author's wanted to keep premiums low, said Cynthia Cox, a senior policy analyst with the nonpartisan Kaiser Family Foundation, a California research organization.

Cox said insurers who did not accurately predict costs and lose money would have to raise premiums. Government refunds are meant to keep that from happening.

“They make it so insurers have less incentive to dramatically increase premiums,” she said. “This first year, it was very difficult for insurers to know how to set their premiums.”

Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation in Washington, criticized the programs as a “back-door way of bailing out the insurers.”

The reimbursement programs, funded through taxes on insurance plans and the medical industry, could result in huge payments to industry, Haislmaier said.

“This is the great black-box money pit of Obamacare,” he said.

Highmark's plans on are popular because they are the lowest cost in the state — about 30 percent less expensive than those from rival UPMC Health Plan, for example.

Highmark officials have said they priced their plans appropriately. “We don't intend to lose money,” CEO William Winkenwerder said in February.

Highmark spokesman Aaron Billger said the loss stems from higher than expected “claims expenses that we will incur for these individuals who are new to having health care coverage.”

UPMC spokesman Paul Wood said he is not surprised to learn that Highmark would lose money.

“I think it's safe to say that we created an actuarially sound, fiscally responsible product that is still priced below the national level,” he said.

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

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