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Western Pennsylvania employers look at insurer options in Highmark vs. UPMC

| Monday, June 16, 2014, 10:30 p.m.

The question of whether to switch insurers to keep in-network access to UPMC's vast system of hospitals and doctors will trump cost as Western Pennsylvania employers make decisions about health insurance for next year, experts predict.

With its own health plan and three national insurers lined up, UPMC made sure employers have alternatives to Highmark Inc., the region's dominant insurer, as they begin to choose between the health care giants whose reimbursement contract expires in seven months.

Employer health plans cover more than half of Americans under retirement age, and in Western Pennsylvania, most people still get insurance through Highmark, said Mark Cherry, a senior market analyst for Decision Resources Group, a Burlington, Mass.-based health care research firm.

“UPMC is really having to go after the employer groups. ... They need patient volume,” Cherry said.

Employers' choices will have implications for thousands of workers — and for the fortunes of Highmark, UPMC and national insurance carriers Aetna Inc., Cigna Corp. and United Healthcare.

“Before, cost was it, because you weren't worried about disruption,” said Elliot Dinkin, CEO of Cowden Associates, a Downtown benefits consulting company that works primarily with midsized companies. “The network was so big (with Highmark). Now they have to worry” about paying costly out-of-network rates for UPMC.

“It is the first time they've looked at anything other than cost,” Dinkin said.

Still the state's largest health insurer, Highmark had its share of the market for fully insured commercial business in Allegheny County slip from 54 percent in 2011 to 49 percent last year, according to data from Decision Resources Group.

“We remain a very strong health plan in the marketplace,” spokesman Aaron Billger said, noting the customer retention rate for July 1 plan renewals is about 90 percent.

UPMC has said it would lose $500 million a year if it renews a contract with Highmark because the insurer would steer patients into its Allegheny Health Network hospital system.

Highmark has said UPMC will give up about $2 billion a year in claims the insurer pays for UPMC to treat its members.

Down to the wire

Though many employers won't decide for several months, some chose sides early.

Allegheny County and two consortiums representing public school employees in the Pittsburgh region made public their decisions to stick with Highmark — and got deals.

American Eagle Outfitters, Dick's Sporting Goods and Westinghouse Electric have quit Highmark for one of the insurers that will keep in-network access to UPMC.

A survey by the Pittsburgh Business Group on Health found that many large employers and thousands of workers are leaning toward switching to an insurer that can guarantee less costly, in-network access to UPMC.

The group, which represents some of Pittsburgh's biggest employers, found in March that 28 percent planned to replace Highmark health plans. Fifty-three percent said they would offer employees a choice of Highmark and a plan from Aetna, Cigna, United or UPMC Health Plan.

Highmark long has been the dominant health insurer, claiming about 3 million members in Western Pennsylvania, a total that includes members outside of Pennsylvania who are employed by Pittsburgh-based companies.

Competitors began to take some of its business when UPMC said in 2011 that it would not renew its Highmark contract because the insurer planned to buy hospitals and become a competitor. Highmark last year established Allegheny Health Network of seven hospitals.

“It seems like it's really starting to dawn on people that this Highmark-UPMC thing isn't going to happen,” Cherry said, referring to a contract extension.

Though it's not expected to affect the contract, Gov. Tom Corbett has directed the state Insurance commissioner and Health secretary to lead talks between Highmark and UPMC officials to make sure that critically ill patients don't lose access to necessary medical services, such as cancer care.

Shifting market shares

UPMC Health Plan's share of the market grew during the past three years, a trend the health system's leaders expect to continue.

“The fundamental issue is, people care a whole lot more about their doctors and their hospitals than having a Highmark blue piece of plastic in their wallet,” UPMC spokesman Paul Wood said.

Aetna, which had about 10 percent of the fully insured commercial market last year and gained Westinghouse, Dick's and American Eagle, is picking up other companies and expects major gains in members by the end of the year, said Brian McGarry, Aetna's head of national accounts in Pennsylvania. He declined to provide membership numbers.

“We are feeling very positive about growth,” McGarry said.

Cigna, which had less than 1 percent of the market last year, experienced “double-digit” membership growth during the first several months of this year, said Julia Huggins, the insurer's president for the Mid-Atlantic region.

“We're expecting that to grow throughout the year,” said Huggins, who declined to provide specifics.

United, which had about 2 percent of the market last year, expects to nearly double its membership in Western Pennsylvania by next year, said Dan Tropeano, vice president for Pennsylvania and Delaware markets.

It has 250,000 members in Western Pennsylvania, Tropeano said, “and we have a significant pipeline for Jan. 1 representing the potential for over 200,000 new members.”

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

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