A.M. Best Company Rates UPMC Health Plan B++ (Very Good)
PITTSBURGH, Pa. (January 5, 2001) — A.M. Best Company Inc., one of the world's most respected insurance rating companies, has given UPMC Health Plan a financial rating of B++, "very good."
The B++ category is assigned only to insurance companies that have "very good financial strength, operating performance and market profile," according to A.M. Best. Those companies rated B++ "have a good ability to meet their ongoing obligations to policyholders,'' A.M. Best states in its insurance reports.
"We are pleased to receive such a high rating from the world's oldest and most authoritative insurance rating company. We're especially pleased to have such a rating even though we've only been in the commercial health benefits business for two and a half years. It speaks well of our success in bringing employers and employees of western Pennsylvania a choice in health benefits," said Patricia Liebman, chief executive officer of UPMC Health Plan.
UPMC Health Plan is the fastest growing health benefits company in western Pennsylvania, providing enhanced access HMO and other health benefits products to 271,000 people. Headquartered in Pittsburgh, the Health Plan is a subsidiary of UPMC Health System, which has 31 merged and affiliated hospitals throughout western Pennsylvania.
A.M. Best did a full review of UPMC Health Plan's financial information in late autumn of 2000. The review included the company's business plan, market presence, administrative operations, and future projections for enrollment and medical costs, according to Patricia Darnley, UPMC Health Plan's chief financial officer.
"The rating organization analyzes the details behind the financials," Darnley said. "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. This is important to us, since we're a startup company."
Startups have greater up-front costs than established companies, Darnley said. Typical startup costs for insurance companies are in infrastructure - things such as hiring people and building computer and other business systems. "If you look simply at financial reports, then a startup in a strong growth mode like UPMC Health Plan will often get a lower rating," Darnley said.
Earlier in 2000, Weiss Ratings Inc. gave UPMC Health Plan a D-minus rating. Darnley expects a similar rating from Weiss this year, even though UPMC Health Plan is now breaking even financially.
"We believe A.M. Best gives a more accurate picture of a company's operations," Darnley said. "A.M. Best looks only at insurance companies. They've been doing ratings since 1899, longer than any other company. And their analysts spent a lot of time with us and looked at a lot of detail during their on-site visit."
Best also took into account the financial strength of UPMC Health System, the parent company of UPMC Health Plan, Darnley said. UPMC Health System is the largest employer in western Pennsylvania, with more than 30,000 employees. UPMC Health System has total assets of $3.7 billion, and had earnings of $50 million on total revenues of $2.6 billion for the fiscal year ending June 30, 2000.
Earlier this year, two other credit rating companies gave UPMC Health System A+ financial ratings. Standard & Poor's and Fitch IBCA did evaluations based on 1999 audited financial results, and fiscal year 2000 interim financial data. Both companies included reviews of the Health System's four divisions: Hospital Division, Physician Division, Diversified Services, and the Insurance Division, which includes UPMC Health Plan. UPMC Health System's ratings placed it in the top 30 percent of all rated health care systems in the United States.
UPMC Health Plan began the year with 188,802 members. By midyear, the Health Plan had 217,545 members.
And as of Jan. 1, 2001, the Health Plan had more than 271,000 members, which is a 44 percent growth in membership from Jan. 1, 2000.
"We are honored that so many families in western Pennsylvania have put their trust in UPMC Health Plan to provide health benefits coverage. We believe that they've given us their trust because of our superior customer service and the fact that with UPMC Health Plan, doctors and their patients make the important medical decisions," CEO Liebman said.
UPMC Health Plan uses what it calls the "Accountable Provider" business model: it gives doctors and hospitals a great deal of authority to make decisions for the best medical care of patients. In return, it asks doctors and hospitals to be accountable - both medically and financially - for their decisions.
"We are financial partners with our doctors and hospitals, and employers and employees - not a traditional insurance company," said Liebman. "We work in partnership to control costs while at the same time improving patient care and quality of service. It can be done. We're proving it every day. That's why were the fastest-growing plan in the state."
UPMC Health Plan does not second-guess decisions of its doctors and hospitals. Instead, UPMC Health Plan gives its doctors and other providers information on key benchmarks such as hospital re-admission rates, prescribing patterns, and outcomes of medical treatment for their patients.
Then, the Health Plan compares that information with the patterns for the doctors' peers regionally and nationally. This information, which is shared with doctors and hospitals, allows doctors and hospitals to deliver the best care they can, at the best possible cost.
Also, the Health Plan has several doctor-led committees that establish "best practice" guidelines on how to treat diseases and other conditions. These committees are made up of practitioners who see patients every day. At UPMC Health Plan, doctors who actually see Health Plan members make the health care decisions, not insurance executives.
Additionally, these same Health Plan doctors lead disease management committees that help patients with those illnesses that are very costly to treat and can be debilitating if left unchecked - conditions such as diabetes, asthma, and high-risk pregnancies.
Since its inception, UPMC Health Plan pioneered many benefits that other health insurance companies are just starting to offer: self referrals to specialists without seeing a primary care physician; reduced paperwork; and allowing women to see an obstetrician/gynecologist without having to get a referral. UPMC Health Plan offered its women members the right to see an obstetrician/gynecologist specialist whenever they wanted long before it became a state mandated benefit.
"As we move forward in 2001 and in coming years, UPMC Health Plan will continue to lead the way in helping our doctors and hospitals develop the best ways to improve health care," Liebman said.
On Jan. 1, 2001, UPMC Health Plan will begin offering a Medicare+Choice HMO, under the name "UPMC for Life." It is an alternative to traditional Medicare plans and it provides enhanced services, such as pharmacy benefits.
To start, UPMC for Life is being offered in seven western Pennsylvania counties: Bedford, Blair, Cambria, Fayette, Lawrence, Mercer and Somerset. In the fall of 2001, the company plans to expand UPMC for Life to Allegheny, Armstrong, Beaver, Butler, Washington and Westmoreland counties. Further expansion of UPMC for Life into other western Pennsylvania counties is also possible.
UPMC Health Plan is offering UPMC for Life at a time when many other health benefits providers are dropping their Medicare HMOs. In 1998 and 1999, nearly 200 companies nationally either pulled out of the Medicare+Choice program, reduced benefits, or added premiums. In June of 2000, seven leading HMOs announced plans to leave the Medicare+Choice market, uprooting more than 700,000 beneficiaries across the nation. Among the companies in Pennsylvania that dropped their Medicare+Choice HMO products during 2000 are: HealthGuard of Lancaster, Inc.; Health Central (based in Harrisburg); and Keystone Health Plan Central.
However, UPMC Health Plan is bucking the trend by entering the Medicare HMO market while others leave. "We have a dramatically different model - one that puts physicians instead of insurers in the drivers seat. It has worked well for us in the commercial market. We think this strategy will also help us become a credible player in the Medicare business, both in market share and financial stability," said Mark Kriscunas, vice president, government programs for UPMC Health Plan.
UPMC Health Plan will also launch, in the next few weeks, a second Medicare program to supplement standard Medicare benefits. It will be available to eligible Medicare beneficiaries throughout most of western Pennsylvania.