"Leverage concerns tied to large mergers and concerns about the profitability of business sourced from health insurance exchanges are the key factors underlying Fitch's negative outlooks," said
Fitch believes that the repeal and replacement of the Affordable Care Act (ACA) which became a possibility following November elections which saw
Repealing the ACA would likely enhance insurers' underwriting flexibility, reduce sector wide fees, and promote more varied product design (e.g. low-cost catastrophic coverage) and pricing capabilities that reduce adverse selection risk that resulted from provisions of the ACA. While these changes would affect the entire sector, they are most likely to benefit the financial results of insurers currently offering ACA exchange products. These insurers are more likely to be nonprofit insurers.
President-elect Trump's plan for replacing the ACA appears to have several key components, namely promoting competition, providing tax incentives for consumers, establishing high-risk pools and changing the way the federal government provides
Fitch's base case projected 2017 earnings call for modest increases in EBITDA and net income with flat EBITDA-based margins and a decline return on capital. Employer group membership EBITDA-based margins are expected to be in the high single digits, and
The full report, '2017 Outlook:
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Source: Fitch Ratings