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February 8, 2001

UPMC Health Plan now breaking even, officials say

The UPMC Health Plan, which covers about 12,000 Pitt employees, has turned a financial corner, health plan officials said. The plan is now breaking even and has received a high financial rating by a top insurance rating company.

A.M. Best Company Inc. recently gave the UPMC Health Plan's financial rating a B++ rating, that is, "very good."

"We are pleased to receive such a high rating from the world's oldest and most authoritative insurance rating company," said Patricia Liebman, chief executive officer of UPMC Health Plan. "We're especially pleased to have such a rating even though we've only been in the commercial health benefits business for two and half years."

The B++ category is given to insurance companies rated by A.M. Best as having "very good financial strength, operating performance and market profile." Those companies rated B++ "have a good ability to meet their ongoing obligations to policyholders," the A.M. Best insurance report stated.

A.M. Best reviewed UPMC Health Plan's financial information in fall 2000. The review included the company's business plan, market presence, administrative operations and projections for enrollment and medical costs, according to Patricia Darnley, UPMC Health Plan's chief financial officer.

"A.M. Best doesn't just look at what is reported to the state insurance department, but instead gets below the surface and obtains a feel for the company by viewing operations, meeting its people and asking important questions," Darnley said. "This is important to us, since we're a start-up company."

Start-ups have greater up-front costs than established companies, Darnley said, including hiring people and building computer and other business systems. "If you look simply at financial reports, then a start-up in a strong growth mode like UPMC Health Plan will often get a lower rating." Darnley said.

Darnley acknowledged that the health plan had received a D-minus rating from Weiss Ratings Inc. in 2000. "But you have to evaluate and compare the methodologies. Weiss is formula-driven. They look only at the Pennsylvania Insurance Department financial reports all insurers are required to file. They do not make an on-site visit."

A.M. Best, in contrast, studies the inner workings of a company, she said. They also took into account the strength of the health plan's parent company, UPMC Health System, with its total assets of $3.7 billion.

Darnley said the health plan is breaking even financially and is expected to show a profit by this May, the next financial reporting period. "We set a goal of 200,000 subscribers, which we've surpassed. We are now moving past the start-up phase, and have most of our systems in place and our processing is controlled in-house. From all indications, we will be moving up in the Best ratings."

The health plan was founded in 1996 as Best Health Care of Western PA, a Medicaid HMO. It was 85 percent owned by UPMC Health System, which purchased the remaining 15 percent in 1997. That year, the company filed for commercial HMO and point of service products and changed its name to UPMC Health Plan.

The company began to offer HMO coverage under a self-insured arrangement to employees of UPMC Health System and several affiliated hospitals in January 1998, and began to offer fully insured commercial HMO coverage in July 1998.

Last month the health plan expanded its offerings to include a Medicare+Choice product in seven Pennsylvania counties.

The health plan currently has more than 270,000 subscribers, with 5,157 physicians at 61 hospitals throughout 19 counties in western Pennsylvania. The enrollment figure represents a 44 percent growth in membership from Jan. 1, 2000, making it the fastest growing health benefits company in the state, according to a health plan fact sheet.

In July 2000, Pitt entered a three-year, sole-provider contract with UPMC Health Plan. About 77 percent of Pitt participants are subscribers in the UPMC enhanced HMO plan; 20 percent opted for point of service, and 3 percent for the comprehensive plan, according to Human Resources officials.

–Peter Hart


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