Highmark continues to grow

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Health care isn't recession-proof -- witness the job cuts at the University of Pittsburgh Medical Center and West Penn Allegheny Health System in recent weeks -- but the third leg of Pittsburgh's health-care triumvirate, Highmark Inc., has so far escaped the worst effects of the recession, adding jobs at a time when others are subtracting them in record numbers.

The dominant Pittsburgh health insurer, which is seeking a merger with cross-state counterpart Independence Blue Cross, held a job fair in Harrisburg last week, and is planning another for Pittsburgh from 2 p.m. to 6 p.m. Thursday at Highmark's Downtown offices. The company has 300 to 400 job openings, largely in software, business analysis, application testing and data monitoring, said spokesman Aaron Bilger.

The number of high-tech openings "speaks to the role technology plays in our business," Mr. Bilger said.

Ironically, it's the company's software and high-tech positions that might be shed if and when the merger with Philadelphia's IBC takes effect. Last year, when the two companies announced their merger plans, the two CEOs said the new insurer would drop 1,000 jobs from its combined work force, primarily through attrition.

But for now, said Mr. Bilger, Highmark is in a hiring mood.

"We have business needs that are available today," he said.

Despite the cuts at UPMC and West Penn, Pittsburgh's job market has been relatively stable, adding 5,000 jobs in October when the state lost 17,000 net jobs and the country shed 240,000 (November brought an additional 533,000 job cuts nationally). The regional stability obviously is good news for Highmark, because a health insurer stands to lose businesses and policyholders if a region sheds payroll positions.

And that's generally the forecast for health insurance firms nationally -- health insurers should be planning for lower-than-expected membership gains in some cases, and enrollment declines in other cases, as employers dump jobs by the tens of thousands. The employers that aren't cutting jobs may instead try to trim their benefits packages, as a way of minimizing their premium rate increases.

A.M. Best Co., a credit rating agency that specializes in the banking and insurance industries, gave a negative outlook to the health insurance industry. Standard & Poors did the same, revising its outlook in early November, said S&P credit analyst Joe Marinucci.

"The commercial marketplace has been stagnant the last couple of years," he said.

Much of the industry growth over the past few years, he said, had been nonorganic, driven instead by a rollout of numerous government-sponsored products -- Medicare Part D, for example. Those rollouts are drying up now, at the same time that the economy is rapidly deteriorating.

"It's going to be a challenging period," Mr. Marinucci said.

Nonprofit Blues plans are better insulated against recessions than their for-profit comrades, in part because they tend to borrow less and invest more cautiously, meaning that even if their investment portfolios have taken a beating, it shouldn't affect their short-term business plans. But the economy's poor state will still be reflected in most insurers' new pricing models, Blues and non-Blues alike, said Jill Brown managing editor of the AIS Report on Blue Cross and Blue Shield Plans.

Blues and insurers in general are going to be "more conservative in how they set prices" for employer plans, Ms. Brown said, because they won't have the investment income to fall back on, bolstering their bottom lines. But insurers will likely price more competitively on the individual products market, trying to grab up customers who have lost their jobs and are looking to maintain coverage.

For 2009 renewals, Highmark's small-businesses customers can expect premium rate increases in the double-digits. But those who are enrolled in one of Highmark's many individual plans should generally be seeing rate increases of less than 10 percent (Highmark requested permission to increase rates on 17 individual plans in the autumn, according to the state Department of Insurance).

"No one is going to be able to raise prices very steeply on the individual products," Ms. Brown said.

Bill Toland can be reached at btoland@post-gazette.com or 412-263-2625.


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