Highmark: Best first-half financial performance since 1996

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Those results represented a nearly $500 million improvement over the first half of 2016, making for the best first-half financial performance since Highmark was formed in 1996, President and CEO David L. Holmberg said.

They were driven by continued improvement in Highmark’s government health plan business, strong performance in the commercial and senior health plan businesses, significant operational improvements at its Pittsburgh-area Allegheny Health Network and continued solid performance by the diversified businesses, which include dental, vision and stop loss, officials said.

None of the gains resulted from Highmark’s recently announced plan to sell its managed care vision subsidiary to private equity firm, as that deal has not yet closed, said Karen Hanlon, executive vice president and CFO.

That transaction will, however, be a “game-changer,” Holmberg said. So, too, will be a recent decision by the Pennsylvania Insurance Department to modify the conditions of the 2013 order that created provider Allegheny Health Network, he added.

That decision allows Highmark greater flexibility to invest in Allegheny without state approval. As Trib-Live reported, Highmark sought the move earlier this year as it looked to invest $850 million in Allegheny over the coming two years.

One of Highmark’s core businesses, Allegheny was established to compete with Western Pennsylvania rival UPMC.

Highlights of Highmark’s financial performance report included:

• Highmark’s health plan reported an operating gain of $480 million for the period ended June 30, up $399 million over the same period last year. The performance was driven by a turnaround of $329 million in the government business.

That segment, which includes Highmark’s Medicare Advantage, Affordable Care Act, Medicaid and small group segments, “has rebounded strongly” from weak ACA performance that drove losses in 2015 and depressed performance in 2016,” the company said.

• Highmark’s commercial business showed a gain of $196 million for the first six months of the year, up $70 million from last year.

• Health plan membership was nearly 5 million through June 30, while July 2017 renewal rates are comparable to the prior year across Highmark’s core markets in Pennsylvania, Delaware and West Virginia, reaching 96 percent.

Highmark remains the largest commercial health plan in the tri-state region and the largest commercial health plan in Pennsylvania, the company said.

• Highmark’s diversified business’ combined earnings declined moderately year over year to $95 million. The company said the drop was “largely attributable to continued soft sales experienced across the entire retail sector since mid-2016 as well as an increased incident of claims in our stop loss business in 2017.”

• HVHC, the vision business, reported an operating gain of $41 million, a decline of $24 million from the same period last year as it continues to battle the retail trend and works to drive volume to its Visionworks stores.

• Highmark’s stop loss business, HM Insurance Group (HMIG), reported an operating gain of $7 million, a decline of $13 million year over year.

Medical stop loss insurance offers provides protection against catastrophic or unpredictable losses, something that is critical for self-funding employers, for example.

• The diminished performances at HMIG and HVHC were offset by strong performance in Highmark’s dental business, Dauphin County-based United Concordia Dental, which delivered an operating gain of nearly $47 million, up $27 million year over year.

• Allegheny Health Network’s results represent the organization’s best financial performance since its inception, officials said, contributing $13 million in operating gains, an improvement of $26 million year over year. The system reported an excess of revenue over expenses of $28 million year-to-date, an improvement of $47 million over prior year.