UPMC charges Highmark Health with overstating its reserves
February 2, 2016 10:18 PM
In the latest dust-up between UPMC and Highmark, UPMC claims its rival as overstated its cash reserves by as much as 50 percent.
By Kris B. Mamula / Pittsburgh Post-Gazette
Health insurer Highmark Health has nearly 50 percent less money set aside to pay claims than the health insurer indicated in regulatory filings, the result of a “feckless strategy, which has backfired at every turn,” rival UPMC claims.
In the latest dust-up between the two Pittsburgh health giants, UPMC claimed in a Jan. 19 letter to the state Insurance Department that Highmark’s estimate of its reserve funds was significantly inflated.
Highmark has overstated its policyholder surplus by at least $1.75 billion or 46 percent as of Sept. 30, UPMC treasurer C. Talbot Heppenstall wrote in the letter. The true amount of the reserve is about $2 billion, not the $3.8 billion Highmark claimed in a regulatory filing in September, according to the letter.
What’s more, 52 percent of the $3.8 billion “is or will be invested in Allegheny Health Network,” according to Mr. Heppenstall. “Burdened with a failing AHN and a dwindling insurance market presence, Highmark is immobilized into a lose-lose strategy,” he wrote.
Insurance Department spokesman Ron Ruman said UPMC’s letter had not prompted a second look at Highmark’s numbers.
“Our consultant believes Highmark’s information is accurate,” Mr. Ruman said. “That’s the assumption we’re operating on until we have reason to believe otherwise.”
Highmark spokeswoman Lynn Seay said UPMC’s letter “clearly exhibits UPMC’s continued self-interest and focus on eliminating competition in the Western Pennsylvania market.”
“We are financially strong and committed to making the necessary investments in AHN to preserve a competitive health care alternative to UPMC,” she said in a statement.
Allegheny Health Network is the health system that Highmark launched in 2013 with the acquisition of Allegheny General and affiliated hospitals as an alternative to UPMC’s dominant health system in the region.
“Highmark’s strategy to date seems to have been a political one that does not focus on the promised rebuilding of AHN,” Mr. Heppenstall wrote. “Rather, Highmark’s strategy has been designed to villainize UPMC in the hopes of stoking government interventions to force a system wide contract and otherwise diminish UPMC.”
Prompting UPMC’s challenge was Highmark’s request to give its affiliated hospital system $175 million for various upgrades and equipment purchases. UPMC is challenging the figures Highmark used to value its reserves, figures that are used by regulators, credit rating agencies and others.
Kris B. Mamula: email@example.com or 412-263-1699.
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