OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has commented that the U.S. Supreme Court ruling on
the Patient Protection and Affordable Care Act (PPACA), commonly
referred to as health care reform, will not have a ratings impact to the
majority of health insurers. Earlier today, the U.S. Supreme Court
issued its ruling on PPACA and determined that the law is upheld
including the individual mandate. However, A.M. Best is maintaining a
negative view on smaller companies that specialize in the small group
and individual health sectors over concerns about profitability due to
the minimum loss ratio requirement.
Many carriers have diversified over the past few years and offer
products to multiple segments, including individual, employer groups and
government-sponsored (both Medicare and Medicaid managed care), which
provides for more diversified membership, revenue and earnings.
Furthermore, several of the largest carriers have expanded with
supplemental business that is more service oriented and non-regulated.
These complementary products provide health insurers with varied sources
of earnings and cash flows, which can enhance sustainability of
However, A.M. Best has concerns about profitability for smaller
companies that specialize in the individual and small group markets.
Typically, these segments have a lower medical loss ratio and a higher
administrative expense ratio. PPACA has a requirement for a minimum
medical loss ratio, and while these carriers have reduced broker
commissions, their lack of economies of scale may impact their ability
to lower administrative expenses enough to comply and remain profitable.
Furthermore, these companies tend to have less diversified product
portfolios than those of larger carriers, and could be more negatively
impacted by the implementation of exchanges in 2014.
A.M. Best will be following up in the near term with additional
commentary regarding the U.S. Supreme Court ruling.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.Sally Rosen, 908-439-2200, ext. 5280Managing
Senior Financial Analystsally.email@example.comKenneth
Frino, 908-439-2200, ext. 5012Group Vice Presidentkenneth.firstname.lastname@example.orgRachelle
Morrow, 908-439-2200, ext. 5378Senior Manager, Public Relationsrachelle.email@example.comJim
Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public
Source: A.M. Best Co.