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A rating agency says Vermont’s tough rate review process is weakening the finances of the state’s biggest health insurer, Blue Cross Blue Shield of Vermont.

AM Best said last week that it has changed the rating outlook for Vermont Blue to negative, from stable, for the company’s long-term issuer credit rating.

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The rating agency left the company’s financial strength rating at B++, or Good.

Vermont Blue is still well-capitalized, but its financial performance is marginal, AM Best said.

AM Best said it expects to see the company’s current level of risk-adjusted capital remain under pressure .

In recent years, Vermont Blue “has reported sharp losses in underwriting results, where in some cases the organization’s investment income did not provide a sufficient hedge to stabilize pre-tax operating performance,” AM Best said.

The poor underwriting results over the past four years have been caused primarily by “being unable to receive adequate rate increases approved through the state’s rate review process,” AM Best said.

Vermont Blue and its subsidiary, the Vermont Health Plan, provide health coverage for about 80,000 Vermont residents.

Vermont Blue reported $7.6 million in net income for 2017 on $578 million in subscription revenue, according to a financial statement prepared using Vermont’s statutory accounting rules. That compares with a net loss of $9.7 million on $566 million in subscription revenue for 2016.

— Read Watchdog: Vermont’s ACA Exchange Had Big Problems in 2014, on ThinkAdvisor.

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