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1263BEFORE THE INSURANCE DEPARTMENTOF THECOMMONWEALTH OF PENNSYLVANIAStatement Regarding the Acquisition of Control of or Merger withDomestic Insurers:Highmark Inc.; First Priority Life Insurance Company, Inc.;Gateway Health Plan, Inc.; Highmark Casualty Insurance Company;Highmark Senior Resources Inc.; HM Casualty Insurance Company;HM Health Insurance Company, d/b/a Highmark Health Insurance Company;HM Life Insurance Company; HMO of Northeastem Pennsylvania, Inc.,d/b/a First Priority Health; Inter-County Health Plan, Inc.;Inter-County Hospitalization Plan, Inc.; Keystone Health Plan West, Inc.;United Concordia Companies, Inc.; United Concordia Dental Plans of Pennsylvania, Inc.;United Concordia Life and Health Insurance CompanyBy UPE, a Pennsylvania nonprofit corporationSUPPLEMENTAL RESPONSE TO PID INFORMATION REOUEST 3.5 FROM THEPENNSYLVANIA INSURANCE DEPARTMENTInformation Request 3.5Provide a full and complete copy of any communication (wbetber by letter, email orotberwise) and/or otber document provided to and/or received from any governmental orregulatory entity related to tbe Transaction tbat is not otberwise required to be submittedin connection witb tbis PID Information Request. "Governmental or regulatory entity"includes but is not limited to, tbe Pennsylvania Attorney General's Office, tbe PennsylvaniaGeneral Assembly, departments or agencies oftbe Commonwealtb (otber tban tbePennsylvania Insurance Department), otber state insurance departments, the United StatesDepartment of Justice, tbe Federal Trade Commission, otber department or agencies of theUnited States or any otber state, and any political subdivision or otber governmental unit.RESPONSE:Attached at Tab A is correspondence sent to or received by local counsel with respect to changeof control filings required by the following regulatory entities: Delaware Insurance Departmentand Ohio Department oflnsurance. Attached at Tab B is a letter dated February 14,2013 fromSenator Don White to Dr. William Winkenwerder.This Response relates to governmental and regulatory approvals in other states only and will besupplemented with respect to other notices, consents or approvals.UPE120 Fifth AvenuePittsburgh, P A 1522216UPE-0022618
DELAWAREUPE-0022619
MITCHELL WILLIAMSDoak FosterDirect Dial: 501-688-8841Fax: 501 -918-7841E-mail: dfoster@mwlaw.com425 West Capitol Avenue, Suite 1800little Rock, Arkansas 72201 -3525Telephone: 501-688-8800Fax: 501-688-8807November 20,2012VIA FEDERAL EXPRESSMichael Houghton, Esq,Leslie Polizoti, Esq.Brenda Mayrack, Esq.Morris, Nichols, Arsht & Tunnell, LLP1201 North Market Street, 18th FloorWilmington, DE 19801Re: February 14,2012 Form A Statement Regarding theAcquisition of Control of Highmark BCBSD, Inc. by UPE:Applicant's Twelfth Set of Responses to Department's First Set of Requests forProductionDear Mike, Leslie and Brenda:This letter and the attached disks constitute Applicant's twelfth set of responses to yourrequests of March 19, 2012. The first response was submitted on April 5, 2012, the secondresponse was submitted on April 12, 2012, the third response was submitted on April 19,2012,the fourth response was submitted on April 27, 2012, the fifth response was submitted May 9,2012, the sixth was submitted on May 11,2012, the seventh was submitted on June 15,2012, theeighth response was submitted on July 26, 2012, the ninth response was submitted on August 22,2012, the tenth response was submitted on September 6, 2012, and the eleventh response wassubmitted on September 25,2012.We are also providing you with a copy of a letter from the PID to counsel for UPE datedSeptember 26, 2012, requesting supplemental information related to Amendment No.1 to theForm A that was filed with the PID. We will provide you with copies of the responses to thosesupplemental requests, which relate to numbered requests as to which you have previouslydesignated as PID requests to be responded to for Delaware as well, as we receive them.CONFIDENTIALITY REQUESTThe documents/information submitted with these responses to the Delaware InsuranceDepartment ("Department") by UPE, the Applicant in the Form. A, and/or Highmark Inc.("Highmark") (in those instances where Highmark is the owner and/or provider of thedocuments/information) that are marked "Confidential" or "Confidential ProprietaryInformation" are submitted pursuant to the Department's procedures, protocols and practice(collectively "Protocols") on confidentiality with respect to documents/information submitted inconjunction with a Form A filing. These documents were submitted to the Pennsylvania2545005.1Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.c.Arkansas ' Texas ' New YorkI Attorneys at LawI MitchellWilliamsLaw.comUPE-0022620
Michael Houghton, Esq.Leslie Polizoti, Esq.Brenda Mayrack, Esq.November 20,2012Page 2Insurance Department ("PID") with a request that they be treated as confidential underPennsylvania law. Therefore, we are requesting that these documents also be treated asconfidential under Delaware law for the reasons set forth below. A disk label bearing the legend"Confidential" shall designate all attached or included materials within the confidentialitydesignation. Those documents for which we are not requesting confidentiality are contained on aseparate disk.The documents/information submitted as confidential documents/information areconfidential and protected materials and/or excepted from public disclosure pursuant, inter alia,to 29 Del. C. § 10002(g)(2), 18 Del. Admin. Code 908-3.0, and the Protocols. Such documentsshould be maintained as confidential and should not be made available for public inspection orcopying because they contain the types of information referenced in the various referencedProtocols, statutes and regulations as being trade secrets and commercial or financial informationobtained from a person which is of a privileged or confidential nature. The release of thedocuments/information could cause substantial material harm to the competitive position of UPEand/or Highmark and/or one or more of their affiliates, including material losses to one or moreof such companies.UPE and Highmark, as well as their affiliates, including but not limited to BCBSD,jointly and severally, request that the Department, any other representative of the State ofDelaware (the "State") and/or any consultant to the Department provide written notification toUPE and Highmark in advance of any release of any of the documents/information submittedwith these responses if either the Department or any other agency or representative of the Statedetermines that these documents should not be accorded confidential treatment or theDepartment, any other representative of the State, or any consultant to the Department receivesany request for access to these confidential documents/information from third parties. Writtennotification should be made to:Frederick K. CampbellDoak FosterMitchell, Williams, Selig, Gates & Woodyard, PLLC425 West Capitol Avenue, Suite 1800Little Rock, Arkansas 72201(501) 5.1UPE-0022621
Michael Houghton, Esq.Leslie Polizoti, Esq.Brenda Mayrack, Esq.November 20,2012Page 3RESPONSES TO REOUESTS FOR PRODUCTIONREQUESTI: ion.2.4.Distribution of Funds.In addition to the funding commitments described in Article 2 of the2.4.1MfIliation Agreement, provide a full description of any plans of the Applicant or anyHighmark and WPAHS Affiliate to declare or cause to be declared any extraordinarydividend, liquidate any of the Domestic Insurers, sell, transfer, donate, assign or create anylien or encumbrance upon its assets or merge them with any Person or to make any othermaterial change in their business operations, corporate structure or management. Do notcross reference to other information. Please list and describe each such plan.Supplemental Response: See supplemental response to PID contained on the attacheddisk labeled "CONFIDENTIAL" and Bates numbered DE-DOI-0030493 through DE-DOI0031308.5. Organization and background of entities involved in the Transaction.5.1.Information related to all Highmark and WPAHS Entities.5.1.1For (i) the Applicant; (ii) Highmark; (iii) each Highmark Affiliate; (iii)UPE Provider Sub; (iv) WPAHS; and (v) each WPAHS Mfiliate provide copies of:With respect to each entity listed in Section 5.1.1 that will have its5.1.1.3Articles of Incorporation and/or Bylaws amended when the Transaction is completed,provide a comparison document showing the changes that are proposed to be made in suchdocument when the Transaction is completed.See response to PID included on attached disk labeledSupplemental Response:"PUBLIC DOCUMENTS" and Bates numbered DE-DOI-0031309 through DE-DOI-0031944.2545005.1UPE-0022622
Michael Houghton, Esq.Leslie Polizoti, Esq.Brenda Mayrack, Esq.November 20,2012Page 4As always, we greatly appreciate your assistance and are available to answer anyquestions that you may have.Sincerely,MITCHELL, WILLIAMS, SELIG,GATES & WOODYARD, PLLCByDF/kaEnclosurescc:William E. Kirk III (w/enc.)Ronald E. Chronister (w/enc.)Jack Sencak (w/enc.)2545005. 1UPE-0022623
OHIOUPE-0022624
THOMPSON-HIN E -------c IN-C-IN-N-ATl-----CO-W-MB-US ;";,,;,,,,;,. -N-EW-YiORJ(--.;.::. .:.:.:.:.:.::.:.::::.:.:.:::: ATlANTACLEVElANDDAYTON'WASHINGfON, D.C.February 12,2013Via Hand DeliveryKelly MaynardOffice of Risk AssessmentOhio Department of Insurance50 West Town StreetThird Floor, Suite 300Columbus, OR 43215RE:Acquisition of Gateway Health Plan of Ohio, Inc. by UPEDear Ms. Maynard:This letter provides further updates to the Form A that was filed by UPE with the OhioDepartment of Insurance on January 17,2012 concerning UPE's proposed acquisition ofGateway Health Plan of Ohio, Inc. We are writing because there have been additional changesto the Affiliation Agreement and other agreements. Consequently, on January 18,2013, UPEfiled Amendment No.2 to the Form A (the "Amendment") with the Pennsylvania InsuranceDepartment.I spoke with Tim Biler, Assistant Chief FinanciaI Analyst on February 5, 2013 and brieflydiscussed the changes that were reflected in the Amendment to the Form A filed with thePennsylvania Department. At the conclusion of that conversation, Mr. Biler indicated a shortsummary of the changes by letter would at least initially be acceptable to the Ohio Department.However, of course, if the Ohio Department desires additional information or has questions, wewill be happy to promptly respond.The principal changes that necessitated the filing of the Amendment with the PennsylvaniaDepartment are the following :1. The Affiliation Agreement has been amended to reflect some changes in the FundingCommitments by Highmark to West Penn Allegheny Health Systems ("WPAHS").Those changes do not increase the total Funding Commitments of 475 million asreflected in the Afftliation Agreement and the Form A as originally filed. Theamendments to the Funding Commitments relate, in part, to an escrow of 50 milliondollars being provided by Highmark in conjunction with a tender offer transaction underwhich Higbmark would purchase Allegheny County Hospital Development AuthorityHealth System Revenue Bonds Series 2007 A from bondholders who tender their bonds.Under the terms of the tender offer, Highmark would purchase the tendered bonds forcash at a price equal to 875 per 1,000.00 of principal. Highmark estimates that at least80% of the outstanding bonds will be tendered. Highmark has arranged for a loan of upAlan.Berliner@ThompsonHine.com Phone 614.469.3268 Fax 614.469.3361THOMPSON HINEATTORNEYS AT LAwur41 South High StreetSuite 1700Columbus. Ohio 43215-6101728376.1www.ThompsonHine.comPhone 614.469.3200Fax 614.469.3361UPE-0022625
THOMPSON-- HlNE ---------------------------- -------Kelly MaynardFebruary 12,2013Page 2to 600,000,000 to finance the tender. Highmark anticipates holding the bonds asinvestments for up to 3 years until WPAHS completes a tax-exempt bond offering andbuys the tendered bonds from Highmark.2. The Amendment describes two additional affiliation transactions that are part ofHighmark's strategic plan to develop an integrated delivery network. The financialcommitments associated with the affiliation transactions with these two communityhospitals remain within the total projected cost for implementation of the integrateddelivery network as previously reported in the Form A. The addition of the two entities,Jefferson Regional Medical Center (JRMC) and St. Vincent Health System (SVHS) arereflected in the attached Organizational Chart showing the proposed UPE OrganizationalStructure. This chart should replace the chart originally attached to the Form A at Tab D.3. With respect to the Highmark Organizational Structure, there have been severaladditional provider acquisitions/affiliations under HMPG, Inc., as reflected page 2 of theOrganizational Chart for Highmark, Inc. This chart should replace the chart originallyattached to the Form A at Tab B.4. Lastly, revised financial profonnas and business plans were included with theAmendment to reflect updated information concerning the financial results of Highmarkand WPAHS. These proformas and business plans also incorporate the additional coststo Higbmark associated with the tender offer transaction.Please be advised the that Amendment to the Affiliation Agreement and the tender offer willhave no impact on Highmark subsidiary insurers. UPE will remain the ultimate controllingperson for the insurance holding company system.As indicated above, we will be happy to answer any questions or provide any additionalinfonnation.Very truly yours,AX Alan F. Berlinercc:Ron ChronisterSarah P. ChambersUPE-0022626
------Proposed Corporate StructureHighmark Inc. , , . . .-r -. ,. ,. , . C,, ,. -",,' -' ,,"-. . . . . . . . . . ." ,. Jr. . . , . ". "'-- .1 . ,-,., .'.HealthjSubsidiaries 1 ,. . , ,L. ,,", . . . . , 'I. " ,. - ,""0'Non-HealthSubsidiaries ., ,".'". - """" .". ",.,,,,,,UCCI,iHVHC'"Ir -,"- ,",- ejHMIG.o" ,' fUGHMARK.UPE-0022627
HIGHMAJU( INC.D/B/A HlGHMARK BUJE cross BLUE SHIELD AND HlGHMARX 8WE SHIElDFEIN 23·1 123NAlC GRotii' CODE 0112 · NAlC COMl'ANY CODE S4n1.pAIIIUNIlEP CONCOIWIACOMPA."I1ES. INCHCl.lNC100%FEIN 1S·3D02ln100%FEIN 2 16«7516NAlC COMP"l'!Y CODeNAIC COMPANYCOl)E IIGS-VTII INC'DIBIA HKifIM.Io.RI( BLUEa.oss BLUE SIIIElD WESTVD.GINlAIDOI1iwvlJ).1TED COtlCOaDlAC lMI'A1oIlES,IIICSUBSlDIAJ.IESfEJll1s.M46 ISNAIC COMPANY CODEPoUleD. aENEFIn. I,J!X'HMPGINC100%FO\JNDAnoN"1'OUNIl.4nON"VENTUIIES INCFEIN 2C).2JS:I206PA100%PALDmC.FANA/CCO!olPANYFEIN l S - 1fI!D/ lS-11766\6FEIN 4S· )lS.1.FEIN 2 1 Sn.S7EEIN 25-110 IIl4lEIN l NAlC roMPANY CODE\J5OC.PA.COOE 101l l.,AIIDAVIS VISION.INC100%VJVAOmQUaINC100%NYFElNZHlmMNJfEn' 1l-30S1991InrUNION IlENa'rrMJ\NII.GEME)/l. INC100%PAFEIN :zs.I"' SlIBSIllIAIUESStt'ACE5SEEPAGE.10Cl".4NYAWnJO ,. INCVlSJONVIORltSSUBSlDIAItIESlP . iNC or1I'EIN 7 -2ll177S'''IVADAV1SVlSlONHMXlSIJ8SlDIAlUESSEE PAGE 1IEMl'LOYEE BENEFITDATA SD.VICESFEIN II·l.95S(»1COMPANY99%KHPWlIMHEAUllINSUR.ANCE COMPANYt--UYSTOI' taALlHPLAN WEST. INCI INC100%WVJEIII ss.o6lS7 IHlGJf/oV.RX SENIOR AHIGIIdABK I1% UIl10IJ BE)IEfllMA.'lA0EMENTPAFEIN lS-1t:2 S100%fEIloI S4- hI) 7.16!lAIC COMPANY CODE717 AlEA, INCHICiRMAU HlE.1.LC-100%!% G,lIM II'IS\.IP.ANC GROUP. INCPAFEIN 45·3999145-tl- sEMI'IXE100%PA.ssoaATESFEIN lS-1646J 1S, . ' .U :TNERSHlPFEIN 2S-1no612JOIHTLY 0WNmA.FFlUATES100%PAFEIN 1S-171lO17r--Z4% LP1S'AL':;rANDAJU) nOI'nTYCORPOItAl1QN100%SDPACI;''AFEIN 2S-166tWlJIIGHNAlU( BeaSD INC"100%D FEIN SIII02040S NAIC 3JlI7IItHIGIIIoCAJJ( CI\SUAl.lYHMI.II'EINSUUJoICE1NS!lL\l'fCl: COMPANYC(J6gANYIIICM PA1-PI.RJN 1S-!334QJINAlC CONPANYTHEGlJEWA'/DELAWAl\ ao!JI'. LTDANCII.l.AIlY1000"I)EFEJN S1 1411INSURANCEAGENCY100000DEfDN 5 1-GllllJI3UI AeweFElN o.ll)oI 1mNAIC CONrANYCOOE ,LINC100%PAFEIN 2S-lI l lo4SlIIIHIoI BE.NEftT ADMI! lSIRATORS.11MSltOUXSfllVlCES.1NC1-PAFEIN n-13Io4mBN LIFE INSlJ\I.ANQ:HNCAI'TIVEKMCASUALTYCOMPANV JFNEWYOJU: JNStmANCE100% NYFEIN lS-18OOla2N.UC COJ.6ANY COOIi6011J.NYCOMPANYI VTroMPANYFEIN 6S-1Z14111FEIN 17.otUTTl3NAIC .uIYIWC s : CODECOOE I272O-vr1000PARlSKIlASEDSOl.UllONS. L C100%B.FErN 6SoII61 1ClO Nou-profit corporation. Control is maintaiDCld through.abilIty to appoint the board of dITector.; as sole memberUPE-0022628
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HIGHMARK INC.UNITED CONCORDIA COMPANIES, INCSUBSIDIARIES1TIIIUNTJEX)\.NT1!I) altICOlU lAVNITEtl CONCORDIA\JNITEI) CONCOItOIA06'(TALftAIo/ ,1NCDENIAL PUNS OFl OO!'CAUl'O»UA. INCCONCNDIAsa.VICES, INCl00!'NMFEDI 11-1 0951DEJoITAL couou.T1()NOf' Al.ABANAl00!'FElN6].I 1'WC CONPAHY CODE47QJ'-AJ.1FEIN l3-1lW6SNAIC CONPAl'IY alOEfmlU-IS42l6lINAIC COI\4J'/UoIY CODe9Sl5J-MD9S7I9-CA.tJNnEI) CONCOIUXA1tlNITED CONCORDIAINSUIIANC UFEAND H A1.nt X1MrANV Of'N 1\'YOU:IWSURANCE COMPANY100%fEIN 1I.31lOG4SNAJC COMPANY CODE6GlU-NYl ao'''FEml3-I661GNNe COMPANY CODE6ll94- AIIJNJTtiI) COfICQIU)IAlI'ISUIVJ'ICE CDNPANY100'''FEIN 1i-G311761JIUI'IITfO COl'ICOK.DIAoert'AL I't»ISOf TIlEMlDWEST,INC100%FEIN 31-221901NAlCCOMl'ANYCOOU61*MlIImmm CONCORDIAIUNII'ED IAUI'IClB) CONCORDIADElUAI.PUNS OFXENnXXY, lI'ICDENTALI'LANlI OfI'ENNSYLvANIA., IWCDENTAL PLANS OFTEXAS,INC100%1I fEIloIl3-l.)CI fElN 74-. TFEIN 61 -1 12l/CIIJNAIC COMPANY CODEszou.xyNAIC COtDANY CODENAIC COMPAJI;Y CODE.7OI9-l'A.95 1 TXNAIC CQIoII'ANY CODEU1116-AZ3UPE-0022630
HVHCINC.IVIVA OP11QUE, INCINTERNATIONAL GROUPfVTVAII'CORPI N) 12.3MI079IIVIVAIVJVA CANADA, INClCOlO100'.4tiJ(JV)I-NJSO% V.va Opoique. Incsov. Jacl BcI y GroupFEIN 22-J300Zl9FEIN 2l-a I064S1IMIJlACI.EOP11CS,D CCJ\100%JI·"IVAITAUA19'.4 V. &tojIaI%V.rIVJVAomQUEDEMEXlCO. SA IleCVvtVA EUROPA, INCINlUNAllONAI. INC1TvtV" EYeWEAJI. UKLTI Ioo%V. TTVlVABu.sJl.VIVA DEtTfSO!lA)l1)COMD.clOVIVA E't WEAllHONG KONG. LIDlCO%Vnov.:I----DEraooorosOrncosLmA(V. JI.ruJI)SOI4 y", UICSC!% V. Hoo&Kont.(IV)VlVAfJANCEIoo%V. SC!%V,.UI(SO%MomuIIrVIVA E'tE'IIEAIlAllSnAUA PlY t Tl \IV)SO% V. HoosIC.VI\I A SOIWEIZ(S SO%OENOI'I.\GlOO%VM VIVAl'IEDn1.ANDBY )100-/, vn. DeansdIIadVfVAEYEWEMBlUl.l.ENVE1TJUE11S GmbH(Aiodft.)IOIJ%V. VIVa Optique Group*Viva ltalia Operations ceased Septemba 2004- I process of dissolution4UPE-0022631
HVHCINC.VlSIONWOIUCS OF AMDUCA, INC.TXIIEMPIIU:VISIONivrSION"WOIUCS. INCCDlTER.,INC100%\NYDEFEIN 14-1516016100'-'FEN 02-«0770f6IVISlOl'IWOUSENTEanISES.1NC100%DE1EN3 I.ETAILMANAGEMENT.u.c100%DEDEFElN7 OFElN7 S2I1IIVlSION.U.YEOCA MANA EDVISIONWOIUCSPI.OPD.TIES.INCVISIONCARE. INCDlSnIBUnONSEllVlCES,JNC100%TXFEIN 374l9S9DEFElN7" 5(100%7XFEIN 14-17S9()Io4IVISlONWORX.S LABSElMCES.lNC100%nFEIN O4-Pl:9T75UPE-0022632
IDGHMARKINC.TTTINTER-COUNn'HEALTH PLAN. INC·PA Don-profitIINTER-COUNlYHOSPITALIZAnONPLAN, INC PA aon-profit50%FEIN 23-0724427NAIC COMPANY CODE 547U-PATNATIONAL INSTITUTEFOR HEALTH CAREMANAGEMENT. INC.DEINDEPENDENCE BLUE CROSS& HlGHMARK BLUE SIOELDCARING FOUNDATIONFOR CHILDRENfA DOD-profit 1FEIN 12-271471J50%FEIN 23-2063810NArC COMPANY CODE 53l52-PAL.L.c.] 1 119-;.,PREFERRED HEALTHSVSTEJ\.fS, INCORPORATEDPA100%FEIN 23-2219720HMO OF NOR'IllEASTERNPENNSYLVANIA, INCd/b/a FIRST PRIORITY HEALTH40%PAFEIN 23-2413324GATEWAYHEALTH PLAN, L.P.2FAi------Ventura lac.FEIN 25-16']945NAIC COMPANY CODE 96601-PA1FIRST PRJORllY LIFEINSURANCE COMPANY. INC.Jointly Owned with:LIndependence Blue Cross (50% each)2.NEPA (60%)3.NEPA (59.9"/0) Control is maintained through affiliation agreementswhich allow for coMol oftbe Boards of DirectorsI--49·!.I.P.] % G.P. beld by HighmarkGATEWAY HEALTH3PLAN OF OKlO. INC.40 1%OHPAFEIN 23-1905083N.4.IC COMPANY COD E 60147-PA100% hdd by GakwayHealth Plau, LP.FEIN 31).G282076NAte COMPANYCODE 1132S-OHIGATEWAY HEALTHPLAN, INC.PA100% held by GatewayHe-ttll Plaa, LP.FEIN 25-1505506NAIC COMPANY CODE96'313-P."6UPE-0022633
TAB B
State SenatorDon Whitecor{MrrtEEs{lst Senatorlal DlstrlctHAiilgBUlO' tA'l7t2O'3o41BANKINC & IilSUiA'IICE' CHAIR'{ANtRAt{6PORIATION, VICE C}lAlRtilANcoMlrtUN ltY & lcotloillc oEvcLoPflE,{TENVIRONI ENTAL FEAOUNC-s A ENENOY3?AII OOVEFNIIINT2llnA'1.6724?AX:7tt'?72'l5et6tA PH'LADEL?I{IAATRTtsYt' DtANA. PA !570t724.3!7.0lttFAXi 72&.ar74la!(ToLL rtFlE)PA I NFRASTiUCtU RE la{VESrilSilTauaHoilrvSEi ATE gOX aogo4lr"E 3'AT3 CAPITOL(PEXi{VEgT)666 l7.oltlI09 SOUT}' JSFPERSON AYREETTITTANNIN@. PA T6'0IfttNttrlo & REc .Aritatlofl ADvlsoiY BoAnoFenste uf lpennrgluunicFebruaryt4,20t3724'149'3016Fexr 72il-544-4eE 39tO Wt .tlAt PENII HlcrwAYnuiiYSvlLLE. tA15664'r2tr.92a.2422?A'(z '12a82'f.a49aDr. William Wlnkenwerder, Presldent & CEOHighmarkFifth Avenue Place120 Fifth Avenue, Suite 111Pittsburgh, PA 15222-3099Dear Dr. Winkenwerder:furthe residents of westernprovldersand lnsurers. Such a desire is laudable.Pennsylvania to have open access to all health careThank you for your recent letter expressing HighmarKs deslreHowever, for almost two years, l've observed rather extraordinary events in westernPennsylvanla revolvlng around two separate but related matters which have caused a great dealofdiscontent:1l The flnancialdistressof the West Penn Allegheny Health System (WPAHSI and Hlghmark'sevolving affillatlon agreement seeking to return the system to a profitable status whilecompeting with the University of Pittsburgh Medlcal Center (UPMC), and;2lThe UPMC/Highmark insurance contract now set for expiration on January 1, 2015.The outcome of these two matters will have profound cons quences on the long term delivery of healthcare In western Pennsylvanla and deserve thorough and deliberate scrutiny by the PennsylvaniaInsurance Department (PlD), your policyholders, the employees of WPAHS and the citizens of westernPennsylvania.Since our January 23'd meeting with Sen. Scarnatl, l've considered Hlghmark's stated deslre tohave both the WPAHS affiliation approved by the PtD no later than April 3Q 2O13 and an extended longterm insurance contract executed wlth UPMC as soon as posslble. Candldly, the content of the mostrecent affiliation agreement and prior public statements by Hlghmark offlclals are inconsistent andrequire clarification.UPE-0022634
Dr. WlnkenwerderFebruary 14,2013Page2Primarlly, l'm concerned about the consequences a long term insurance contract betweenHighmark and UPMC could have on HighmarKs abilityto execute the turnaround of WPAHS asenvlsloned ln your amended affiliation agreement. Two excerpts from the filing clearly state Hlghmarkdoes not antlclpate a long term arrangementwith UPMC and that your proJectlons are based on thecontract not being renewed afterJanuary L 2015.On page 143 of the document, 1210 it states:"Highmarh's contractingpositionwith UPMC - The conffact etctension between Hlghmuk andUPMC requires Highmark to pry higher contrrcting rates than il had been paying in order tosecure in-network access to UPMCfrcilities and UPMC phystciots through December 2014,Ailhough Highmark intends to continue to pwsae a longer tern agrcementwith UPMC, WMChas publicly stated that it doe.s not intend to reneu' lhe contracls. Accordingly, the proiectionscrsEume that UPMC will not renew the contacts, mtd access to certain UPMCfacilities will beterminated, efective December 3 1,20 I 4'On page 148, the document further states:"Highmark Product Changes - Anticipated volume changes usociated with the inffoductionof new insurance producls were incorporated into the projections. As was noted above, theprojeclions assurne that UPMC wlll not renew ils contracts wilh Hlghmqrk and access lo cerlainUPMC facilities wlll be termlnated efeclive December 31, 2014. Additional volume waslncorporated into the projections due to these UPMChcilities being out otHighmark's networkat that time."Further, on August t,2OI2, Deb Rice, Division President of Health Services, testified before theSenate Republlcan Pollcy Committee that WPAHS will require an increase of over 2O000 newadmissions annually to make the system viable and that every new admlssion would %bsolutelt'' comeat the expense of UPMC because "eventually we're not golng to have a contract with UPMC, likefy. sothe capacity will be necessary for our members." When considerlng the overall patlent volume ofwestern Pennsylvanla ls declining, and Highmark's acknowledgement that all new admissions to WPAHSwill be at the expense of UPMQ l'm sure you can appreciate my skeptlclsm that such a drastic shift ofpatient volume can occur unless those insured by Hlghmark are no longer glven the option of accesslngUPMC doctors and hospitals.Given Highmark's recently stated desire to secure a long term contract, I believe any revlew ofthe WPAHS afflliation agreement wlll be comprehensive only after Hlghmark provides projections on theviability of the WPAHS affiliation agreement if a long term contract is signed between Highmark andUPMC.UPE-0022635
Dr. WinkenwerderFebruary 14,2413Page 3Therefore, I respectfully ask that any analysis completed on Highmark's behalf whichdemonstrates the impact a long-term contract between Highmark and UPMC wlll have on the efforts torevive WPAHS be amended to your most recent affiliation agreement. lf no such analysls exists, Istrongly encourage one be completed in a timely manner in order to provide the InsuranceCommissioner, your policyholdeO the employees of WPAHS, community hospltals and the cltizensofwestern Pennsylvania with an opportunity to fully understand the impact a long term contract wlthUPMC will have on Highmark's abllltyto turn WPAHS around. lf lt ls Highmark's desire to continue itscontracted relationship with UPMQ I belleve this must become part of the Insurance Departmenfspublic record as this omission may not only resuft In an inaccurate and Incomplete record but lead to adecision by the Department not based on Hlghmark's actual strategic direction.Alternatively, Hlghmark could clarifo that it does not intend to pursue a contract with UPMCbeyond January 1, 2015 whlch would assure all partles that the current WPAHS filing accurately reflectsthe anticipated landscape of the health care marketplace ln western Pennsylvania.Iwould appreclate your prompt response clarifoing Highma*'s position on these matters.Sincerely,Senator, 41st DistrictDCWtstcc: The Honorable Tom CorbettThe Honorable Michael ConsedlneThe Honorable Joe ScarnatiUPE-0022636
HM Life Insurance Company; HMO of Northeast em Pennsylvania, Inc., d/b/a First Priority Health; Inter-County Health Plan, Inc.; Inter-County Hospitalization Plan, Inc.; Keystone Health Plan West, Inc.; United Concordia Companies, Inc.; United Concordia Dental Plans of Pennsylvania, Inc.; United Concordia Life and Health Insurance Company By UPE .
