Senators White, Costa Address Highmark-UPMC Impasse

Senate Bill 1358 would protect consumers if parties don't settle dispute

Recognizing the impact the UPMC and Highmark dispute could have on millions of Pennsylvanians, Senate Banking and Insurance Committee Chairman Senator Don White (R-Indiana) and Senate Democratic Leader Jay Costa (D-Allegheny) have drafted legislation to protect consumers if the two parties do not settle their grievances.

Senate Bill 1358 would amend state law to give the State Insurance Commissioner greater authority to extend the terms of the existing contract between Highmark and UPMC, thereby providing additional time to allow for adjustments to the health care marketplace in western Pennsylvania.

Highmark and UPMC are battling over their service reimbursement contract which is set to expire on June 30, 2012. If the contract is not renewed, about 2,700 doctors in the UPMC system would be considered "out-of-network" for Highmark, which provides insurance coverage for about 3 million people in western Pennsylvania.

The Senate Banking and Insurance Committee has held three public hearings this fall to review the dispute and determine what, if any, regulatory role Pennsylvania has over the battling parties.

"After hearing testimony and considering submissions by consumers, physicians, advocacy groups, and the primary parties involved in this dispute, it would be unacceptable to allow physicians' contracts to expire on June 30, 2012 without state action. We as legislators cannot simply stand on the sidelines and watch consumers get pushed off a cliff," Senator White said. "Since neither side seems willing to work towards reaching an agreement, it becomes more and more apparent that legislative action will be necessary."

"The two sides in this ongoing dispute have had ample time to work out an acceptable solution, and it would be unconscionable to allow this to conclude in a way which could prove detrimental to millions of people in Western Pennsylvania," said Senator Costa. "We have made every attempt to bring both sides to the table, and they are unwilling to compromise. While I would not typically condone the legislature injecting itself into a contractual matter like this, the time has come to use every possible avenue available to make sure that consumers are protected. I believe, that working with the Department of Insurance, we can and must do that."

The Pennsylvania Department of Insurance can't force an agreement between UPMC and Highmark, but under Act 94 of 1975, it can suspend for up to six months the termination of the contract, now set for June 30, 2012. Act 94 was enacted to stabilize the relationship between Blues Plans and hospitals and to ensure that services remain available to subscribers.

SB1358 amends Act 94 to:

Ensure physician services provided at a hospital are subject to Act 94. This change will ensure that subscribers will be able to receive services at UPMC hospitals for a period beyond June 30, 2012, if the Commissioner chooses to invoke Act 94.
Clarify Act 94 as it pertains to contract expirations as well as terminations.
Define Hospital Service Areas and provide the Commissioner with the authority to invoke Act 94 in instances where a hospital has 5 percent or greater share of the available beds in defined areas.
Extend the timeframe the Commissioner may invoke Act 94 from 6 months to 36 months.

The Banking and Insurance Committee's first hearing on the contractual issues as well as Highmark's pending acquisition of the West Penn Health System was held on September 13 at the University of Pittsburgh with testimony provided by State Insurance Commissioner Michael Consedine; James Donahue, III, Chief Deputy Attorney General, Office of Attorney General, Antitrust Section; Mark Pacella, Chief Deputy Attorney General, Office of Attorney General, Charitable Trusts and Organizations Section; Dr. Tony Farah, Chief Medical Officer, and David McClenahan, a board member, of West Penn Allegheny Health System; and David Balto, a former policy director with the Federal Trade Commission.

Dr. Ken Melani, President and CEO of Highmark, and Jeffrey Romoff, President and CEO of UPMC were the featured speakers at the Committee's second hearing, held on September 22 in the Erie Insurance Building in Erie. Dr. Melani and Romoff again testified before the committee at a hearing was held November 30 at the University of Pittsburgh.

Contact:

Joe Pittman
(724) 357-0151