A.M. Best Special Report: Weak Economy, Higher Costs, Enrollment Declines Hurt Results

OLDWICK, N.J.–(BUSINESS WIRE)– Health insurers’ results in 2009 were impacted by rising unemployment, an uptick in utilization, pricing pressures from employer groups and the H1N1 virus. A final health care reform bill was not passed in 2009 and the future of health care reform is uncertain. However, the Obama administration and congressional leaders may opt for a scaled down reform package which meets with House and Senate agreement. That could still result in new financial and regulatory challenges in 2010.

• Rising unemployment led to a 2.3% fall in commercial membership, or a loss of 2.3 million members, for publicly traded health insurers through the third quarter of 2009.
• Claim trends deteriorated as more health insurers experienced increased utilization with rising Medicaid enrollment, H1N1, more COBRA enrollees and an increase in severity/coding by providers.
• Deal activity fell in 2009 with concerns over financing large transactions and the potential impact of health care reform, though Express Scripts Inc. bought WellPoint Inc.’s pharmacy benefit management unit for about $4.7 billion.
• Despite stronger stock and bond markets, investment income faces pressure from low interest rates. Carriers with long-tail liabilities have difficulty finding suitable asset matches amid low yields and weak performance of some mortgage-related securities.

• Health insurers pared down debt when possible during 2009. Debt-to-capital ratios improved for most and capitalization strengthened with realized and unrealized capital gains compared with losses in 2008.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best
Analysts
Sally Rosen, 908-439-2200, ext. 5280, sally.rosen@ambest.com
Carl Austin, 908-439-2200, ext. 5500, carl.austin@ambest.com
or
Public Relations
Jim Peavy, 908-439-2200, ext. 5644, james.peavy@ambest.com
Rachelle Morrow, 908-439-2200, ext. 5378, rachelle.morrow@ambest.com

Source: A.M. Best Company