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Life Health > Health Insurance > Health Insurance

Health Carrier Rating Falls 1 Notch

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Moody’s Investors Service, New York, has downgraded Health Net Inc.[@@]

The rating agency has lowered the rating it has placed on the Woodland Hills, Calif., company’s senior unsecured debt to Ba2 with a negative outlook, from Ba1.

Moody’s is cutting Health Net’s ratings in part because of concerns about unexpected decreases in enrollment and Health Net’s plans to increase Medicare membership.

Health Net, a company that provides or administers health coverage for 6.5 million people, had risk-based capital that was only 110% of the company action level Dec. 31, 2004, and that figure was lower than Moody’s had estimated, Moody’s says in a comment on the rating change.

The RBC level also was down from 165% of the company action level a year earlier, Moody’s says.

Health Net faces no immediate threat of regulatory action because it is meeting all state requirements, but its commercial membership was down 3.3% in March, and the drop was larger than the company had predicted, Moody’s says.

Although Health Net might get new members by increasing in Medicare, Moody’s is worried about the volatility and uncertainty associated with participation in government health programs, the agency says.

If Health Net stabilizes its commercial health plan membership, increases net profit margins to about 3% and increases its RBC level to 150% of the company action level, then Moody’s will change its outlook on Health Net to stable, the agency says.

Health Net has expressed disappointment about the downgrade.

“But we believe there’s a pretty clear road map for us to move back up the ratings chart,” says David Olson. “We have a program in place to address Moody’s concerns.”

Health Net hopes believes it can increase its statutory capital level and firm up enrollment, Olson says.


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