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Highmark's ACA plans lose $590 million

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Highmark Health lost $590 million on its health plans sold on the Affordable Care Act exchanges in 2015, joining the ranks of other large multistate companies that covered marketplace patients who desperately needed and used care.

Many of Highmark's ACA enrollees suffered from expensive chronic conditions and sought treatment more often than expected after being locked out of affordable coverage for many years. In 2015, the second full year of ACA enrollment, UnitedHealth Group, Health Care Service Corp. and several other big insurance carriers posted heavy losses on the exchanges. UnitedHealth, which mispriced many of its plans, has threatened to leave the marketplaces altogether.

Executives at Highmark, a Blue Cross and Blue Shield affiliate based in Pittsburgh, said they are working to stabilize the organization's ACA business, which may include higher premium hikes for 2017 plans. They also chastised the federal government for shortchanging the ACA's risk-corridor payments, which serve as a safety valve for health plans and attempt to keep premium rates stable in the early years. However, Congress made that program budget-neutral.

“These losses are unsustainable for anyone,” Highmark Health CEO David Holmberg said on a call with reporters Friday.

Highmark is still owed $500 million under the risk-corridor program, and HHS has said it will find a way to fund the program. Holmberg said Highmark has met with government officials “regularly to discuss how they plan to honor their commitment.”

The not-for-profit Highmark, which also owns Pittsburgh's Allegheny Health Network, a hospital and doctor system, has viewed the exchanges as a way to expand access to care, but their long-term stability will be predicated on the stability of rates, creating the right provider networks and actively managing the care of the members.

“Our decision to be a part of the ACA exchanges was based on our fundamental responsibility to be a social mission organization,” Mr. Holmberg told Modern Healthcare last year. “As we go forward, there's got to be an evolution, and the government has got to play a role, as we shape the kinds of offerings that are on the exchanges.”

Highmark's operating loss in 2015 totaled $565 million, nearly three times higher than the loss recorded in 2014. Mr. Holmberg and Chief Financial Officer Karen Hanlon attributed most of the increase to the costly ACA exchange population. Only a small portion of the operating deficit, $36 million, came from Allegheny Health Network, which posted higher inpatient and outpatient volumes.

Highmark's revenue in 2015 climbed 5.5% to $17.7 billion. The organization's total deficit, including investment profits, was $85 million, almost the same as 2014. Highmark was able to keep its net loss stable thanks in large part to its acquisition of Blue Cross of Northeastern Pennsylvania.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.