A.M. Best Comments on Colorado Choice Health Plans’ Under Review with Negative Implications Status

By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- A.M. Best has commented that the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of "bb+" of Colorado Choice Health Plans (Colorado Choice) (Alamosa, CO) will remain under review with negative implications (see also Health Insurance).

The maintained under review status with negative implications reflects Colorado Choice's Oct. 27, 2016 announcement that it has entered into a strategic relationship with Melody Health Insurance Inc. (Melody Health), a Denver-based startup for-profit carrier backed by private equity. This relationship is anticipated to commence in December 2016, subject to regulatory approval from the Colorado Division of Insurance and the Colorado Attorney General's Office. This arrangement will convert Colorado Choice into a for-profit entity, and the company will become a wholly owned subsidiary of Melody Health. Melody Health has contributed $1.2 million in capital to Colorado Choice, and has committed to contributing additional capital by year-end 2016 to support Colorado Choice's growing individual major medical business.

Following the material deterioration in Colorado Choice's capital and surplus and significant increase in premium revenue from membership growth through the third quarter 2016, A.M. Best believes the company currently maintains an inadequate level of risk-adjusted capital for its present insurance and investment risks, as well as future growth, as measured by Best's Capital Adequacy Ratio (BCAR).

The ratings will remain under review while A.M. Best continues discussions with management regarding the extent and timing of near-term capital contributions anticipated from Melody Health Insurance Inc. This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED. View source version on businesswire.com: http://www.businesswire.com/news/home/20161216005778/en/

Keywords for this news article include: A.M. Best, Investing, Legal Issues, Health Insurance.

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