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Highmark might retain employers under state's UPMC access deal, Moody's says

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Thursday, July 3, 2014, 10:33 p.m.

A deal that will give Highmark Inc. subscribers access to substantial portions of UPMC's system of hospitals and doctors could sway employers to stay with the state's largest health insurer, a credit rating agency said on Thursday.

Moody's Investors Service called the agreement, announced last week and brokered by Gov. Tom Corbett and Attorney General Kathleen Kane, a “significant breakthrough” and a positive development for the finances of both UPMC and Highmark. Without it, millions of Highmark members in Western Pennsylvania would have had to pay costly out-of-network rates at UPMC, starting Jan. 1.

“The uncertainty created by the stalemate between Highmark and UPMC had cast doubts on Highmark's ability to successfully market and retain its employer-sponsored health insurance policies in Western Pennsylvania,” Moody's said in a one-page report to clients. “We believe that the agreement may convince a number of employers in the region to retain health insurance for their employees with Highmark for at least another year.”

Negotiated as a five-year transition plan, the agreement gives Highmark subscribers in-network access to UPMC's hospitals outside the Pittsburgh metropolitan area, emergency rooms at all UPMC hospitals, UPMC's broad network of cancer services, Children's Hospital of Pittsburgh, Western Psychiatric Institute and Clinic and UPMC doctors who practice at non-UPMC hospitals. It also allows patients with Highmark insurance to remain with their UPMC doctors if they are under treatment for serious illness for as long as needed.

UPMC's flagship hospitals in Pittsburgh, such as UPMC Presbyterian and Shadyside and Magee-Womens Hospital, will be out-of-network next year.

UPMC spokesman Paul Wood said Moody's was speculating about how employers will react to the agreement.

“We have a brand-new, unprecedented, competitive marketplace in Pittsburgh, and we will shortly see how it behaves with the UPMC flagship hospitals like Magee, Presbyterian, Shadyside and Passavant all out of network,” he said.

Highmark spokesman Aaron Billger said the insurer will hold onto many of its customers as a result of the deal. He said Highmark retained nearly 90 percent of its employer-group customers renewing health plans on July 1.

“Customers are continuing to want to remain with Highmark,” he said.

Moody's said Highmark gains additional time to “further develop and improve” Allegheny Health Network, the insurer's system of hospitals that it is boosting to compete with UPMC.

“A key credit challenge for Highmark is to attract new patients to this network by developing a reputation for quality health care at lower cost,” Moody's said.

The agency did not change its credit rating of “Baa3” for Highmark or its rating of “Aa3” for UPMC. “Baa” indicates a moderate credit risk, and is three notches below Moody's top grade of “A.” “Aa” indicates very low credit risk and is one spot from the top.

Industry observers expected many employers to leave Highmark for Aetna Inc., Cigna Corp., United Healthcare or UPMC Health Plan — all of which offer in-network access to all UPMC facilities and doctors — or offer those insurers as an option along with Highmark.

Dick's Sporting Goods and American Eagle Outfitters in recent years began offering their employees a choice of Aetna or Highmark. Westinghouse Electric Co. last year dropped Highmark for Aetna.

Yet other large employers have stuck with Highmark, including the United Steelworkers union, Allegheny County and two consortiums of public school employees.

“This accord is positive for the community, and it does provide more access to Highmark members than previously expected,” Billger said.

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

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