Committee approves bill addressing Highmark-UPMC impasse

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

The Senate Banking and Insurance Committee today (December 13) unanimously approved legislation to protect consumers if UPMC and Highmark do not settle their impasse, announced Committee Chairman Senator Don White (R-Indiana).

Senate Bill 1358, jointly sponsored by Senator White and Senate Democratic Leader Senator Jay Costa (D-Allegheny), amends 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.

Senator White said the legislation was developed in response to the information received by the Senate Banking and Insurance Committee during three public hearings held this fall to review the dispute between Highmark and UPMC.

"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."

Under current law, the Pennsylvania Insurance Department can suspend for up to six months the termination of a hospital contract. Act 94 was enacted in 1975 to stabilize contractual relationships between Blues Plans and hospitals to ensure services remain available to subscribers while attempting to resolve impasses such as the one now occurring between Highmark and UPMC.

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.

SB 1358 now goes to the full Senate for consideration.

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 held November 30 at the University of Pittsburgh.

Contact:

Joe Pittman
(717) 787-8724