Health insurance sector rating remains stable

The outlook for the U.S. health insurance and managed care sectors remains stable, Fitch Ratings announced Tuesday.

The sector’s ratings over the near term are likely to be unaffected by the uncertainty from the fiscal cliff and ongoing implementation of the Patient Protection and Affordable Care Act. Fitch analysts also say health insurers will “continue to successfully manage changes” brought about by PPACA’s eight-year implementation.

Acquisition activity is likely to continue as health insurers and managed care companies look to add technological capabilities, membership, and scale in an effort to overcome ongoing margin pressure. In addition, the increasingly blurred roles between payers, providers and hospital systems could become more prevalent as the health care system strives to better align interests to reduce costs and manage care, analysts say.

There are still factors that could change the rating outlook to negative, analysts say. That includes U.S. deficit reduction efforts that result in significant changes to Medicare or Medicaid funding and erode the sector’s profitability, a sustained increase, likely tied to acquisition activity, in financial leverage, and a reduction in premium rate adequacy derived from unforeseen impacts of PPACA or from Medicare/Medicaid reform.


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