Highmark Health added $1B in net income in 2017 with a ‘substantial turnaround’ in ACA plans

A stethoscope and paper money.
Highmark Health reported a $433 million operating income across all its government plans in 2017. (Getty/utah778)

Highmark Health’s Affordable Care Act exchange plans were profitable for the first time in 2017 as the insurer added $1 billion in net income compared to 2016.

The Pittsburgh-based Blues plan that covers nearly 5 million members in Pennsylvania, West Virginia and Delaware saw significant growth in commercial and government plans, including its Medicare Advantage segment. Highmark recorded $433 million in operating income across all its government plans, up from $22 million the prior year, according to year-end financials released by the company on Monday.

Operating margins for commercial plans increased nearly $100 million in 2017.

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Executive Vice President and Chief Financial Officer Karen Hanlon called 2017 a “watershed year for Highmark Health’s financial performance,” adding that revenue growth was driven, in part, by a “substantial turnaround in the ACA business.”

RELATED: Individual market forecast—Fewer insurers, higher premiums and more instability through 2019

After posting a $590 million loss in ACA marketplace plans in 2015, the insurer’s exchange losses grew to more than $900 million by the end of 2016. Midway through 2017, Highmark began applying its Medicaid managed care model to ACA plans, encouraging patients to use health coaches and access treatment plans, executives told TribLive.

Broadly, insurers are pointing to ongoing uncertainty among insurers participating in the ACA marketplaces. The repeal of the individual mandate, coupled with an abrupt end to cost-sharing reduction payments, is likely to contribute to premium hikes in 2018 and beyond.

Highmark-owned Allegheny Health Network, an integrated system that features eight hospitals and more than 2,800 physicians, also reported its best year to date with a $31 million operating profit after reporting a $33 million loss in 2016. Last year’s financial success was driven by stable hospital volumes, operational efficiencies, and better care coordination through the system's EHR platform.

RELATED: Penn State Health, Highmark Health sign $1B value-based care network deal

Allegheny recently announced a $1 billion investment to build a state-of-the-art hospital and several new “neighborhood hospitals.” The new construction will take place over the next five years. 

Highmark has also inked several lucrative deals with Pennsylvania health systems. In December, the insurer made a $1 billion deal with Penn State Health to form a value-based community care network. In May, the company partnered with Geisinger Health System to create a clinical joint venture aimed at providing “high-value, high-quality” care.

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