PITTSBURGH (April 1, 2016) Highmark Health today announced financial results and performance during 2015, reporting operating revenues of 17.7 billion, an increase of 5 percent over 2014 revenues. Highmark Health also reported a deficit of revenue over expenses of 85 million, holding results flat with prior year despite losses in the Affordable Care Act (ACA) business. The enterprise had net investment earnings of 294 million in 2015, an increase of 40 million over the prior year, and a gain of 249 million associated with the acquisition of BCNEPA. These gains were offset by an operating loss of 565 million, attributable primarily to the performance of its ACA exchange products, which sustained a high level of medical costs for the duration of 2015, similar to the experience of many insurance carriers across the nation. Despite the ACA losses, the company continues to have a solid financial position, which includes 6.3 billion in cash and investments and net assets of 5.2 billion.
"Highmark Health is pleased with our strong, consistent year-over year financial performance despite the impact of the ACA population," commented David Holmberg, President and Chief Executive Officer of Highmark Health. "We continue to invest in our core and growing businesses with nearly 500 million in capital investments in 2015 to improve health care quality and access for our members and other health plan members on our platform. Our strong retention in the commercial and senior insurance markets, near record earnings in two of the diversified businesses, and the continued volume growth at Allegheny Health Network accompanied by another year of progress made in its financial turnaround is encouraging. The western Pennsylvania market has recognized the quality and value that Allegheny Health Network offers and we expect this trend to continue as the regional market shifts due to the pending expiration of the Consent Decrees in 2019. We are confident that Highmark Health is well positioned for future growth and success."
"We continue to make progress towards our goal of delivering an outstanding customer experience, all while maintaining a solid financial profile," added Karen Hanlon, Executive Vice President and Chief Financial Officer. "We are committed to stabilizing our ACA line of business and early 2016 indicators are positive as we have already achieved what we believe is an appropriate level of membership in our ACA individual plans. We also continue to take steps to recover the estimated more than 500 million in risk corridor funding due to us and are focused on sustaining the positive growth trends in all of our affiliated businesses."
The Health Plan performance in the commercial markets continued to be strong with a gain of 217 million while the government market was significantly impacted by the ACA businesses, bringing the total health plan loss to 438 million for the year. Highmark Health continued to take a conservative position on the risk corridor reimbursement due from the federal government in 2015.
The Health Plan experienced an overall member retention rate of 95 percent across all markets. Highmark's Community Blue plan grew by 70 percent. This significant growth in the Community Blue plan is notable because it exclusively features Allegheny Health Network along with a broad network of high-quality, lower-cost community hospitals across the state. Highmark remains the fourth-largest Blue Plan in the country, with 5.2 million members, as well as the largest health plan in Pennsylvania, West Virginia and Delaware. Highmark's Pennsylvania Medicare Advantage plans continue to be ranked first in Pennsylvania and eighth in the nation.
The Diversified Businesses continued to deliver strong operating margins in 2015, with combined earnings of 229 million, driven by near record performance in the vision business and a strong turnaround at HM Insurance Group. HVHC delivered revenues of 1.5 billion and an operating gain of 122 million. Visionworks, which operates 700 retail stores in 42 states, added 56 new stores in 2015 in key metro markets such as Detroit, Michigan and the Boroughs of NYC and realized a 5.3 percent increase in comparable store retail sales. Davis Vision, the managed care component of HVHC, increased insurance enrollment by 1.9 million, putting it on track to provide coverage to more than 22 million members in 2016. HM Insurance Group delivered operating gains of 69 million, a nearly 70 percent improvement over the prior year. United Concordia, Highmark's dental care provider, continued to focus on growth in 2015 while contributing 38 million in operating profits. In addition, the company was awarded the Tricare Dental Program contract as part of a 5-year, 2.9 billion contract, which is scheduled to begin in 2017. United Concordia currently provides dental care to the TRICARE Active Duty Dental Program (ADDP), which serves active duty service members in the U.S. Air Force, U.S. Army, U.S. Coast Guard, U.S. Marine Corps, U.S. Navy, National Oceanic and Atmospheric Administration (NOAA) and National Guard and Reserve Component Sponsors.
Allegheny Health Network continues to make progress in its turnaround, both financially and in its quality of care, recording an operating loss of 36 million, which includes significant cost increases associated with capital investments being made in the system. The performance improvement was driven by increased volumes at both Allegheny Health Network and West Penn Allegheny Health System. Allegheny Health Network had a 3.5 percent increase in inpatient volumes and 1.8 percent increase in outpatient registrations while WPAHS had a 5.1 percent increase in inpatient volumes and 3.3 percent increase in outpatient registrations. AHN's EBITDA, a measure of earnings that excludes the impact of these capital investments, was 87 million in 2015, an increase of 26 percent over the prior year.
Highmark Health's information technology services company, 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, reported an operating gain of 7 million. HM Health Solutions currently has 8.3 million members on the insurance platform, a 36 percent increase since 2010, and is on track to add an additional 2.1 million members by early 2017.
Highmark Health paid taxes in 2015 totaling 514 million, which includes 304 million in federal, state and local taxes, more than 10 million in property taxes in Pennsylvania, and an ACA health insurer provider tax of 200 million.
|(in millions)||Period ended December|
|Allegheny Health Network||(36)||(37)|
|HM Health Solutions||7||4|
|Parent & Other||(327)||(388)|
|Net investment income||294||254|
|Non-operating income (expense)||5||(3)|
|Net assets acquired of BCNEPA||249|||
|(Deficit) excess of revenue over expenses before income taxes||(77)||10|
|Income tax provision||8||93|
|Deficit of revenue over expenses||$(85)||$(83)|
Highmark Health, a Pittsburgh, PA based enterprise that employs more than 35,000 people nationwide and serves more than 50 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 5.2 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, more than 2,500 affiliated physicians, ambulatory surgery centers, an employed physician organization, home and community-based health services, a research institute, a group purchasing organization, 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.
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