Consumers losing in the long run?

The deal between Highmark and UPMC calms a lot of fears in the short term. But the long-term implications, including the impact on insurance premiums, remain unknown.

"In the short run, probably most people will breathe a sigh of relief" that the region's major insurer and major health system have reached an agreement that will keep Highmark subscribers in the UPMC network until 2015, said Martin Gaynor, professor of economics and health policy at Carnegie Mellon University's Heinz College.

"On the other hand, will it be back to business as usual? Are we any closer to achieving transparency on costs? Is it going to have any real effect on competition in this marketplace?" he asked. "They may have made a deal to their mutual benefit but to the detriment of the community as a whole."

For now, just having an agreement in place is good news, said M. Christine Whipple, executive director of the Pittsburgh Business Group on Health, which represents major local employers. "This relieves some of the pressure that employers have been under, dealing with a lot of the uncertainty."

Health consultant Jan Jennings, president and CEO of American Healthcare Solutions, Downtown, can relate to that. Among his 40 full- and half-time staff members, he said, half wanted to make sure they had in-network access to UPMC and half wanted to stay with Highmark and West Penn Allegheny. "I'm off the hook now. I'm taking the afternoon off."

Details about the Highmark-UPMC pact are limited, but sources say Highmark has agreed to pay UPMC at a higher reimbursement rate than it does currently, eventually putting the insurer on a par with national carriers Aetna, Cigna, United Healthcare and HealthAmerica, all of which signed expanded contracts with UPMC last year.

In the short run, the deal appears to benefit the other insurers. Without the contract extension, Highmark would have had preferable reimbursement rates until July 2013, which would have made it hard for the others to compete.

Long term, however, may be a different story, said Mr. Jennings. "The unhappiest people in America right now are the insurance executives who moved to town to try to eat Highmark's lunch."

Even if Highmark's rates are eventually comparable to other insurers, he noted, the others are going up against an established insurer that controls more than 60 percent of the local market. Coaxing subscribers away could be a challenge.

"Can you imagine the conversations going on at corporate headquarters? They're saying, 'Why didn't you anticipate that this might happen?' "

In a statement, David Fields, president and CEO of HealthAmerica, said Wednesday, "We view this [agreement] as a positive development and hope it will refocus the health insurance discussion to more important issues, such as the cost to health care consumers and creating a competitive and sustaining marketplace."

Amy Turkington, spokeswoman for Cigna, said, "While we would have preferred that market forces be allowed to operate, we are confident in the value of our products and services, and we remain committed to the Western Pennsylvania marketplace."

United HealthCare spokeswoman Mary McElrath-Jones said the insurer "will continue to play a role in bringing the benefits of competition to the health care market in Western Pennsylvania. In health insurance markets where there are meaningful choices for health insurance, the entire community benefits from better access to care, higher overall health care quality and lower overall health care costs."

Aetna officials declined to comment.

How this ultimately plays out for consumers remains to be seen, but experts agree that if Highmark is paying more, there's an excellent chance consumers and employers will be paying more, too.

"It would seem that UPMC is the definite winner," said health policy specialist Gerard Anderson of Johns Hopkins University in Baltimore. "Now UPMC does not have to give a discount to its highest volume insurer."

As for who loses, he added, "I think everybody is probably paying UPMC too much. So, in that regard, we're all losers."

This is a particular problem in Pittsburgh, which research has shown spends more on hospital care per person than major cities such as New York, Philadelphia, Chicago and Los Angeles.

"I don't know if this agreement deals with that," said benefits consultant Tom Tomczyk, a principal with Buck Consultants, Downtown.

If it doesn't, that means higher rates for companies already struggling to control their health care costs, he said. "But in the end, it will fall back on the employees, in higher co-pays, higher deductibles and more out-of-pocket costs."

"Let's face it -- our health care is grossly inefficient and just too expensive," said Mark DeRubeis, CEO of Premier Medical Associates, a large multi-specialty physician group based in Monroeville that was recently acquired by Highmark. "We are behind the rest of the country in our efforts to create high quality care at lower costs."

With an agreement now in place, he said, "We can move on to the heavy lifting. As a region, we need to unite and focus on bending the cost curve for care."