An updated filing regarding the proposed relationship between Highmark Inc. and West Penn Allegheny Health System contains significant changes, according to the Pennsylvania Insurance Department.
Pertinent details include the following, according to a PID news release.
• Highmark offers to purchase the outstanding WPAHS's series 2007A bonds for cash at 87.5 percent of par amount. This could lead to payments by Highmark of $600 million or more.
• Principal and interest payments from WPAHS will be deferred until July 1, 2015, on Highmark held bonds.
• $50 million aggregate increase in rates to be paid by Highmark to WPAHS over five years.
• $75 million of funding previously earmarked for medical education in the original affiliation agreement will be redirected (as a grant) to WPAHS.
• Interest will not be payable on Highmark's loans if WPAHS finances do not meet a specific standard.
PID is charged with analyzing legal standards that look specifically at the overall effect any transaction would have on the insurance entity's financial stability, as well as any negative impact it may have on their policyholders and the public.
"Given the considerable increase in the costs associated with this transaction and the numerous and significant changes proposed, the filing will require close scrutiny to assure that the department's review meets statutory standards," Pennsylvania Insurance Commissioner Michael Consedine said. "We will continue to work as quickly as possible to review the transaction through a process that is transparent and provides an appropriate opportunity for public input and comment."
In addition to the WPAHS deal, Highmark announced in June a $275 million strategic partnership with Jefferson Regional Medical Center, a smaller organization in the Pittsburgh area. In October, Highmark announced a roughly $65 million strategic affiliation with St. Vincent Health System in Erie.
To see the filing, click here.