Highmark executives tout steady growth, momentum, $551M in net 2018 income

September 7, 2018

The Highmark sign atop Fifth Avenue Place in Downtown Pittsburgh.

Highmark Health posted $551 million in net operating income for the first six months of 2018, a 3 percent increase from last year as the nonprofit health care system focused on growth and offset losses in some areas with gains in several others, CEO David Holmberg said Monday.

Highmark’s total revenue climbed to $9.4 billion, up $200 million from the same time in 2017.

Holmberg said the improved balance sheets signal Highmark’s ability “to weather whatever is ahead.”

“We continue to demonstrate our strategy is working,” Holmberg told reporters on a call discussing Highmark’s self-reported second-quarter financials.

“We remain firmly committed to getting health care right.”

The $6.9 billion, Downtown-based Highmark netted notable revenue gains in Allegheny Health Network; dental plans for veterans; and its 13-state information technology business, data show. AHN is Highmark’s health care provider.

Highmark further saw a “substantial turnaround” in its stop loss insurance arm, HM Insurance Group, which Holmberg attributed in part to new leadership.

Highmark’s IT company, HM Health Solutions, which supports 13 Blue Cross/Blue Shield plans and nearly 10 million members in multiple states, reported a $29 million operating gain for the first six months of 2018, up by $24 million from the previous year.

Income from commercial as well as government-subsidized health insurance plans held relatively steady. About 97 percent of insurance customers in Western Pennsylvania renewed their plans.

The system confronted losses in areas such as its VisionWorks retail business -- which posted a $9 million operating loss, data show.

The retail industry for vision care has struggled since mid-2016 as retailers struggle to compete with online sales via the likes of Amazon, Holmberg said.

Vision retail sales were “still soft” in the first half of 2018, though Holmberg notes that he’s “cautiously optimistic” about improvement and cited a recent trend of “highly positive cash flow.”

Highmark Health was formed in 2013 as the parent company to insurer Highmark Inc. and the hospital network, which it created the same year.

The parent company’s net gain for the first six months of 2017 was $535 million.

AHN reported operating income of $24 million for the first half of 2018, up 120 percent from the same time last year. The second quarter of this year marked its fifth consecutive period of positive earnings.

“What makes this achievement significant in 2018 is that it was delivered while executing on a value-based strategy designed to better coordinate care, to deliver care in lower cost outpatient settings when appropriate, and to redesign the delivery of care for the highest quality and lowest cost,” said Karen Hanlon, Highmark Health executive vice president and chief financial officer, said.

“We continue to build momentum of reducing care costs and delivering value to our customers,” Hanlon said.

After reaching its highest earnings ever last year, Holmberg said he’s eager to build on the momentum of 18 months of the system’s best financial performances yet.

Highmark further seeks to strengthen its position as the largest commercial insurer in its core markets of Pennsylvania, West Virginia and Delaware, Holmberg said. Highmark has about 4.6 million insurance members, including about 1.4 million who live in Western Pennsylvania.

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