Highmark ekes out $15 million margin in first quarter of 2025

Highmark Health brought in more money than it lost in the first quarter of 2025, but just barely.

Financial results released Thursday show the health care and insurance provider made $15 million in operating income on $8 billion in revenue between January and March.

The success, to some extent, was driven by Allegheny Health Network’s first positive operating margin without pandemic-related assistance in five years.

Allegheny Health Network turned $8 million in operating income last quarter because of higher patients volumes, which Highmark partly chalks up to an unusually severe respiratory illness season and “management actions.”

A major cost-saver has been an ongoing move away from third-party, temporary clinical staff, according to Allegheny Health Network Chief Financial Officer Brian Devine. Labor shortages have forced many hospitals to lean on external workers, like travel nurses, to meet the demand for care.

“That has come with a price, and we have been working to really employ our clinicians and physicians and provide care through an employed model,” Devine told TribLive on a call with other Highmark executives.

Allegheny Health Network has had to keep up with strong and growing demand for care. Highmark said physician visits increased by 7%, emergency room visits by 6%, inpatient discharges and observations by 4% and outpatient registrations by 3% last quarter.

But all that activity left claims surging and sapped Highmark Health Plans. Combined with persistently high prices for prescription drugs and general cost increases, the insurance provider took a $9 million operating loss.

GLP-1 drugs, like Ozempic, and new cancer treatments, though positive for many patients, have been a pain point for the health plan. Costs estimates are made about a year in advance, said Highmark Health Chief Financial Officer Carl Daley, and uptake of certain novel drugs has been higher than expected.

For all this give and take between Highmark’s primary services, what it refers to as diversified assets performed remarkably well.

United Concordia Dental collected $28 million in operating income, while HM Insurance Group, which specializes in protecting employers who self-fund their health benefit plans from losses incurred by large claims, pulled in $19 million.

It’s worth noting the operating income for Allegheny Health Network, Highmark Health Plans and the diversified assets totaled $46 million, when taken independently. That does not account for certain expenses, leading to the $15 million organization-wide figure.

Overall, Highmark had $11.8 billion in cash and investments and net assets of $9.9 billion, a war chest that allows it to weather downturns like what it experienced with last year’s $209 million operating loss.

The 2024 results marked a stark reversal from Highmark’s 2023 net income of $533 million.

Executives nonetheless expressed optimism in a March call with TribLive, and if the first quarter results are any indication, they were right to do so.

Significant challenges lie ahead, however, especially if President Donald Trump and House Republicans get their way with the Big Beautiful Bill. Experts say the bill passed by the lower chamber last week could spike the number of uninsured patients through a nearly $700 million cut to Medicaid.

The effects could be highly damaging for hospitals if they end up providing more care without compensation. The Pennsylvania Health Access Network has identified several Western Pennsylvania facilities at risk for closure under the legislation, including Allegheny Health Network’s Hempfield Neighborhood Hospital.

“We don’t comment directly on future actions,” Daley said when asked how Highmark is preparing for the bill’s possible passage. “But we are monitoring those (issues) closely and working with our external affairs and government team to weigh on those and shape them and get our voices heard.”

Highmark’s integrated model includes Highmark Health Plans, an insurer that has 7.1 million members in Pennsylvania, West Virginia, Delaware and New York, as well as Allegheny Health Network, with its 14 hospitals and more than 2,600 doctors.

All told, the organization has more than 44,000 employees.

Highmark’s chief competitor, UPMC, has yet to release its first quarter earnings. In 2024, it reported $339 million in operating losses, up 71% from the year prior.