Standard & Poor's Ratings Services has downgraded Pittsburgh-based Highmark to "A-" from "A" as analysts believe the health insurer will post weaker future earnings than they previously expected.
S&P said previously, it predicted Highmark's annual returns on revenue would be around 3 percent. Looking ahead, RORs are estimated to be around 2 percent or lower in 2014 and 2015.
The downgrade was also attributed to Highmark's "contentious contract renegotiation process" with Pittsburgh-based UPMC. Highmark is the fourth-largest Blue Cross and Blue Shield affiliate and the dominant insurer in the region.
Last April, the Pennsylvania Insurance Department approved the affiliation between Highmark and West Penn Allegheny Health System, also in Pittsburgh. The West Penn transaction was the cornerstone of Highmark's integrated delivery system, Allegheny Health Network. Throughout the year, Highmark added two other major Pennsylvania-based systems — Saint Vincent Health System in Erie and Jefferson Regional Medical Center in Jefferson Hills — giving Allegheny Health Network a total of eight acute-care hospitals.
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