Highmark vs. UPMC: A tale of two ACA exchange approaches

Two Pittsburgh-based companies, Highmark and UPMC, have had very different experiences on the ACA exchanges. (Getty/RudyBalasko)

When UPMC Health Plan and Highmark entered the Affordable Care Act marketplaces in western Pennsylvania in 2013, it was Highmark that appeared poised for success. But three years later, the tides have turned in UPMC’s favor.

Highmark recorded a loss of $590 million in the ACA marketplaces last year. Total losses to date hover around $800 million, according to an article from the Pittsburgh Post-Gazette. Conversely, UPMC Health Plan is aggressively marketing its individual insurance plans in the region and will offer plans in all 29 western Pennsylvania counties next year.

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UPMC started slowly when entering the exchanges, the article notes, which allowed the integrated health system to minimize early losses to better adjust for the future. It also priced plan premiums competitively, but didn't underprice them. Highmark, in contrast, jumped in quickly and offered more low-cost plans. It gained 99,000 enrollees that first year, but was soon spending $1.20 for every dollar it made in the exchanges.

“We didn’t know if Highmark was going to make money or lose money,” Diane Holder, president and CEO of UPMC Health Plan, told the newspaper, “and there wasn’t anybody in the country who could tell you because nobody knew.”

Highmark attributes its losses to two major factors, according to the article: Misjudging how much new enrollees would use their health insurance and counting on the Centers for Medicare & Medicaid Services to hold to promises that it would cover insurers’ losses in the exchanges through 2016. In May, Highmark sued the federal government for risk-corridor payment shortfalls.

Highmark will serve just 12 western Pennsylvania counties with exchange plans next year, according to the Post-Gazette. The payer also has switched gears to focus more on narrow-network plans. Highmark CEO David Holmberg previously noted that because the exchanges have attracted an influx of chronically ill patients, future marketplace stability will require collaboration among a wide range of community healthcare partners—not just insurers and providers. 

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