PITTSBURGH—Highmark Inc., the state's largest health insurer, plans to launch a new lower-cost, limited-network health plan that will exclude most hospitals and doctors affiliated with the University of Pittsburgh Medical Center.

The Community Blue plan that will debut on Jan. 1 will cost individuals and businesses about 25 percent less than other health plans.

Highmark has nearly 5 million members, but has been sparring with UPMC since it decided to invest $475 million to take over the West Penn Allegheny Health System. West Penn is a Pittsburgh based hospital network that is UPMC's chief—though much smaller—rival.

UPMC owns 19 hospitals and employs more than 3,200 doctors.

Community Blue will cover people in 29 western Pennsylvania counties without access to most UPMC hospitals and doctors, but will still offer 50 "in-network" hospitals and 7,600 doctors.