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UPMC health plan up 32,300, a 7% gain

| Thursday, May 8, 2014, 12:01 a.m.

UPMC's health insurance division added 32,300 members in the last year, a 7 percent gain, as competition for subscribers with Highmark Inc. heated up.

Three other national insurers also are pecking away at Highmark's stronghold in Western Pennsylvania's commercial health insurance business. UPMC officials said on Wednesday that gives them confidence the health care system will weather the end of its contract with Highmark at the end of this year.

“We're very confident ... that we're going to do very well,” UPMC Chief Financial Officer Robert DeMichiei said during a meeting with reporters to discuss the hospital giant's latest financial report.

DeMichiei wasn't able to say how many of the new members added by UPMC Health Plan came because their employers switched from Highmark. Members also could have been added because employers began offering health insurance to employees for the first time, or they switched to UPMC Health Plan for another reason.

But Aetna Inc., Cigna Corp. and United Healthcare also are adding employer groups to their membership rolls, he said.

“It has to come from somewhere,” DeMichiei said. “Highmark is the dominant insurer.”

Highmark scored two high-profile victories recently in the fight to keep members from moving to an insurer that can guarantee full in-network access starting on Jan. 1 to UPMC's 20 hospitals and 3,500 doctors — the largest system in the region.

A consortium representing 43,000 public school employees and their families from 42 districts in Allegheny County said on Wednesday it would remain with Highmark through June 2018. The Allegheny County Schools Health Insurance Consortium said it decided to keep Highmark coverage because it would save money by sending workers to Highmark's hospital system, the seven-hospital Allegheny Health Network.

And last month, Allegheny County Executive Rich Fitzgerald announced that the county would stick with Highmark through 2015, keeping 15,000 employees and dependents on the insurer's rolls.

Those decisions “demonstrate that our customers are behind the Blue Cross brand,” Highmark spokesman Aaron Billger said. “Our membership continues to remain strong.”

James McTiernan, a health care consultant with Downtown benefits firm Triad Gallagher, said Highmark and UPMC are fighting for power over Pittsburgh's health care market. For every employer group that decides to stick with Highmark, the insurer gains leverage that could force UPMC to agree to a contract rather than risk losing significant revenue, he said.

On the other side, he said, for every member that leaves Highmark, UPMC blunts the potential impact of its breakup with Highmark, he said.

“If you look at leverage, Highmark's leverage is members. ... UPMC's leverage is if Highmark is losing membership,” he said. “By locking up significant membership, it has to have some impact.”

Highmark reported 3.2 million members in Western Pennsylvania as of Dec. 31, a number that included an undisclosed number of people who work for large companies based in the region but work outside the state, and its Medicare Advantage members. The total was unchanged from a year earlier.

UPMC Health Plan, the second-largest health insurer in the region, had 483,935 members with health plans through an employer or an individual policy as of March 31. That was up from 451,635 members a year ago. Its total membership, which includes Medicare and Medicaid members and members in county-based mental health plans, was 2.3 million as of March 31, up from 2.1 million a year earlier.

The gain in members helped push UPMC's revenue for the January-March quarter to $2.8 billion, up 8 percent from $2.6 billion in the same quarter a year ago.

Profit from its operations was $64.1 million, a 4 percent increase from $61.6 million a year earlier. Gains from UPMC's insurance business drove the increase, DeMichiei said. Meanwhile, the hospital business was a drag on profitability as severe winter weather led to patients missing appointments.

UPMC's net income was $102.9 million, down from $170 million a year earlier. The decline was caused by lower earnings from investments, DeMichiei 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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