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Health Insurers Look Great, for Now: Rating Agencies

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In spite of all of the upheaval in Washington, the big health insurers that S&P Global and Moody’s Investors Service rate are doing fine.

James Sung, an S&P Global health insurance rating analyst, said today in New York, at an S&P Global insurance conference, that, in the long run, he expects to see a few large, national, integrated health insurance-health care services companies dominate the U.S. health care market.

Carriers need to do what they can to bring down the underlying cost of medical care, Sung said.

Because of high costs, “the current model they have now is not sustainable,” Sung said.

But Joe Marinucci and Hema Singh, two other S&P health insurance rating analysts, said that, overall, the health insurers they rate look fine.

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The ratings of most of the health insurers S&P rates have been stable, and most of those insurers have capital levels that are strong for their rating categories, Marinucci said.

Singh said the rated insurers with Affordable Care Act public exchange plan programs have had stable enrollment numbers this year, and that the ACA Medicaid expansion program continues to boost managed Medicaid plan enrollment.

Analysts at Moody’s, meanwhile, have concluded in a review of health insurers’ first-quarter earnings reports that the eight publicly traded health insurers Moody’s rates generated higher revenue and improved ratios of claim costs to premium revenue.

Those insurers increased their revenue 8% and their enrollment 1%, and their medical loss ratio improved to 83%, from 84.%, according to a Moody’s team led by Dean Ungar.

Centene Corp., a company with large Medicaid plan and ACA exchange operations, has been doing very well at increasing its scale and revenue diversification in recent years, according to the Moody’s analysts.

At the S&P insurance conference health insurance session, which drew top asset managers and analysts from organizations such as Aetna, Voya and the Federal Home Loan Bank system, one concern speakers and audience members identified is the possibility that Congress or the Trump administration could cause new turmoil by eliminating the ACA premium tax credit subsidy.

Another concern that surfaced is the possibility that the failure of an insurer, such as long-term care insurance issuer, could saddle health insurers with guaranty fund assessments.

Guaranty fund assessments stemming from the failure of a midsize long-term care insurance hit health insurers. The lack of guaranty fund assessments this year contributed to a big increase in the large, publicly traded health insurers’ overall profit margins in the first quarter, according to the Moody’s analysts.

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