Highmark Health reports Stable Financial Results for 2014; Allegheny Health Network continues Turnaround

PITTSBURGH, April 1, 2015 /PRNewswire/ --

Highmark Health today announced financial results and performance during 2014, citing revenue growth of $1 billion across all business lines year over year.  The organization reported operating revenue of $16.8 billion, an increase of more than 6 percent over 2013 revenues.   Highmark Health also reported a deficit of revenue over expenses of $83 million in 2014, primarily driven by a one-time accounting action related to the collectability of risk corridor payments for Affordable Care Act (ACA) exchange products.   Despite this conservative accounting action, the company remains strong and stable and maintains nearly $6.5 billion in cash and investments and $5.4 billion in surplus.

The ACA created three interconnected risk management programs intended to protect consumers by stabilizing premiums during the initial years of the law's implementation. Two of these programs, Reinsurance and Risk Corridors, are temporary and provide premium stability for consumers in the first three years of the reformed markets. The third program, Risk Adjustment, was designed to protect against adverse selection in the reformed marketplace. 

"Highmark Health had a solid 2014, with our businesses poised for growth.  We remain financially strong and stable and we are pleased with our top line growth given the increasingly competitive environment we faced last year," commented David Holmberg, President and Chief Executive Officer.  "The breadth of our diversified businesses is what sets us apart from our competitors, and it's important to underscore that one-third of our revenue came from businesses other than our health plan.  In 2014, the financial stability provided by that diversity enabled us to invest more than $500 million across the enterprise to help us exceed customers' expectations, support our social mission, and continue to build Highmark Health into an integrated health care delivery and financing system that is leading the change in healthcare."  

"Highmark Health continues to manage costs and operational performance, and we will take the steps that are necessary to sustain a solid financial foundation in order to support our customers and members," commented Karen Hanlon, Executive Vice President and Chief Financial Officer.  "The risk corridor is an issue that health plans around the country are facing and Highmark Health believes that most, if not all, of these payments will be recovered, but took an appropriately conservative accounting approach.  Additionally, Allegheny Health Network continues to make significant progress in improving its financial position."

Allegheny Health Network recorded an operating loss of $37 million, representing a $365 million improvement over the previous year that included a $311 million one-time goodwill impairment.   Excluding this one-time item, operating results improved by over $50 million driven by improved net patient service revenue and reduced operating expenses.  Had AHN results been incorporated for the full year ended December 31, 2013 – rather than as of the affiliation date of each hospital -- operating results would show further improvement of an additional $80 million year-over-year as a result of turnaround initiatives implemented to restore the system.

The Health Plan business reported breakeven operating results in 2014, a substantial, but expected reduction, from the prior year operating gain of $309 million.  This reduction was primarily driven by risk corridor revenue of $155 million that was not recorded in 2014 and the release of a 2013 premium deficiency reserve liability that was related to guaranteed-issue products.  Excluding these two items, the current year Health Plan results would just slightly lag last year's performance.  Additionally, the health plan continued to spend 90 cents of every premium dollar for care in 2014.

Despite the challenging economic climate, competitive market pressures and the changing industry landscape in Pennsylvania and nationally, Highmark's Health plan continues to be the market-share leader in western Pennsylvania, Delaware and West Virginia with membership of 5.3 million policyholders as of January 31, 2015.   Community Blue enrollment, which totaled 420,000 commercial and senior members, really stands out as a success.  Member retention rates among group purchasers remain strong, averaging nearly 90% across our core markets of western and central Pennsylvania, Delaware, and West Virginia.

The Diversified Businesses continued to provide strong operating margins, realizing a gain of $243 million, a 3% increase compared to the prior year, driven by performance in the vision business, which experienced among its best results ever with revenue of more than $1.4 billion and operating income of nearly $120 million.  This is attributable to strong retail sales at more than 650 Visionworks stores and a 2.4 million increase in our Davis Vision insurance enrollment, which now totals 21 million members.    These results were partially mitigated by lower performance in both the stop loss and worker's compensation segments at HM Insurance Group, which are consistent with patterns seen industry-wide, as well as lower results in dental as a result of renewals of two long-term government contracts.

Highmark Health's newest business, HM Health Solutions, which is focused on meeting the platform and technology needs of the Highmark Health enterprise as well as other health insurance plans, generated operating income of $4 million in its first year of operations.  HM Health Solutions employs 2,000 people and currently provides services to 11 Blue plans in seven states.  

Highmark Health and its affiliates invested $28 million in our communities through philanthropic giving, the Highmark Foundation and related outreach initiatives designed to improve the health and quality of life for residents. 

Highmark Health paid taxes in 2014 totaling $243 million, which includes $93 million in federal, state and local taxes, more than $9 million in property taxes in Pennsylvania, and an ACA health insurer provider tax of $141 million.   

About Highmark Health
Highmark Health, a Pittsburgh, PA based enterprise that employs more than 35,000 people nationwide and serves 40 million Americans in all 50 states, is the third largest integrated health care delivery and financing network in the nation.   Highmark Health is the parent company of Highmark Inc., Allegheny Health Network, and HM Health Solutions.  Highmark Inc. and its subsidiaries and affiliates provide health insurance to 5.3 million members in Pennsylvania, West Virginia and Delaware as well as dental insurance, vision care and related health products through a national network of diversified businesses that include United Concordia Companies, HM Insurance Group, Davis Vision and Visionworks.   Allegheny Health Network is the parent company of an integrated delivery network that includes eight hospitals, a community-based network of physician organizations, and a group purchasing organization, ambulatory surgery centers, and health and wellness pavilions in western Pennsylvania.   HM Health Solutions focuses on meeting the information technology platform and other business needs of the Highmark Health enterprise as well as unaffiliated health insurance plans by providing proven business processes, expert knowledge and integrated cloud-based platforms.  To learn more, please visit www.highmarkhealth.org.

SOURCE Highmark Health

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