Highmark Health, the Blue Cross and Blue Shield affiliate and hospital system based in Pittsburgh, is still losing money on its Affordable Care Act business. And the company will continue to pursue litigation of the law's risk-corridor funding despite the government's willingness to settle.
However, Highmark will sell ACA exchange plans in Delaware, Pennsylvania and West Virginia next year just as it did this year, CEO David Holmberg said Friday during a media briefing.
Highmark posted a $31 million operating surplus in the first half of 2016, a large turnaround from the $171 million operating loss in the first six months of 2015. Like many other insurers, Highmark's ACA plans have crippled its overall finances. Many members were sicker than expected, but the plans were also heavily underpriced.
In the first half of this year, the red ink associated with ACA plans totaled $68 million, Highmark Chief Financial Officer Karen Hanlon said. Last year was far worse, when Highmark lost $590 million on health plans sold on and off the exchanges. Since the exchanges went live in 2014, Highmark's losses have totaled $800 million.
Highmark was able to prune the losses this year by moving to narrow networks, increasing patient cost-sharing and actively assigning care managers to members.
The exchange deficits have been so large at Highmark because the company had anticipated the federal government would fully fund the risk-corridor program, which was created by the ACA to insulate insurers from big losses in the first three years. Instead, the CMS has only paid out 12.6% of those payments nationwide for 2014. Highmark and several other insurers consequently sued the federal government in the U.S. Court of Federal Claims to get full payment.
The CMS recently sent a memo to insurers that indicated the agency was open to settling those suits, which prompted concerns from House Republicans. Despite the settlement offer, Holmberg said Highmark is “staying the course” on the risk-corridor litigation.
“We lived up to our obligation,” Holmberg said. “We did exactly what we were asked to do.” Now, he said, the company expects “the federal government to live up to their commitment to us.”
UPMC, Highmark's primary competitor in the Pittsburgh region, did not factor the risk corridors into its ACA plans because it “felt speculative” to the system's actuaries, UPMC Health Plan CEO Diane Holder told Modern Healthcare this month. UPMC also has no immediate intentions of suing for the risk-corridor money.
Highmark's total revenue increased almost 7% in the first half of 2016 to $9.3 billion. Allegheny Health Network, the eight-hospital delivery system that Highmark acquired a few years ago, is still losing money as well. Allegheny Health lost $17 million in the first six months of this year compared with a $19 million loss in the same period a year ago.