ALEXANDRIA, Va., May 3 -- The Aeronautical Repair Station Association issued the following news release:

In late April, the tax policy debate in the nation's capital took another small step forward as the Trump administration unveiled the president's reform objectives. While short on details, the proposal provides some guidance on where President Trump wants the debate to end up.

Broad Brush Strokes

Based on briefings by administration officials and an outline released by the White House, the president wants to lower taxes and simplify the code for individuals by reducing the current seven tax brackets to three: 10, 25 and 35 percent, doubling the standard deduction so that a married couple won't pay any taxes on their first $24,000 of income and providing additional tax benefits for families with child and dependent-care expenses.

For individuals, the president's proposal would also repeal the estate and alternative minimum taxes, as well as the 3.8 percent Obamacare tax on passive income. The top tax rate on capital gains and dividends would be reduced to 20 percent. However, the administration is also proposing to eliminate all deductions other than those for mortgage interest, charitable donations and 401k contributions.

For businesses, the administration is proposing a 15 percent tax rate for both corporations and pass-through entities and a territorial system to change the way U.S. companies operating internationally are taxed. However, the White House also wants to impose a one-time tax on "trillions of dollars held overseas" (rate not specified) and eliminating "tax breaks for special interests."

Administration officials admit the proposal is short on details and that this is just the start of the tax reform conversation. "[W]e are in constant dialogue with the House and the Senate," National Economic Council Director Gary Cohn said. "We have outlines; we have a broad-brush view of where they're going to be. We're running an enormous amount of data on the proposals right now. We will be back to you with very firm details. We're very confident to where they're going to be, we just wanted to get out and give you a broad-brush overview where we are."

"[W]e are working with the House and Senate on all the details. And this is - everybody has an agreement we are going to move this as fast as we can. And when we have an agreement we will release the details and go through it with all of you," Treasury Secretary Steve Mnuchin said.

What's Next?

Unlike other recent Republican tax proposals, the president's plan isn't deficit neutral. The Committee for a Responsible Federal Budget estimated it would add between $3 trillion and $7 trillion to the national debt over the next ten years. Budget neutrality is an important issue because Republicans hope to use the budget reconciliation process to move tax legislation through Congress. That allows a lower vote threshold in the Senate (reconciliation legislation is privileged and not subject to the filibuster), but to qualify, the bill can't have negative budget impact beyond a ten-year window.

Response from House Republicans was generally positive. House Speaker Paul Ryan (R-Wisc.) said it was evidence of progress and that Trump and Hill Republicans were "getting on the same page." Ryan, Senate Majority Leader Mitch McConnell (R-Ky.), House Ways and Means Chairman Kevin Brady (R-Texas) and Senate Finance Committee Chairman Orrin Hatch (R-Utah) said in a joint statement that, "The principles outlined by the Trump Administration today will serve as critical guideposts for Congress and the administration as we work together to overhaul the American tax system and ensure middle-class families and job creators are better positioned for the 21st century economy."

What Does It Mean for ARSA?

The U.S. aviation maintenance industry is dominated by small to medium-sized businesses overburdened by a complex and inefficient tax code. The Trump administration's reform goals apparently share ARSA's priority for both corporate and pass-through entities. Without all the details, the proposal is a bit of a mixed bag with regards to business incentives and capital investment and leaves unanswered international questions.

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “aa-” (Superior) of the members of Health Care Service Corporation Group (HCSC Group). Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) of Health Care Service Corp Medicare & Supplemental Group Members (HCSC Medicare & Supplemental Group). The outlook of these Credit Ratings (ratings) is stable. (See below for detailed listing of the companies and ratings). The ultimate parent of both these groups is Health Care Service Corporation, a Mutual Legal Reserve Company (HCSC), which is headquartered in Chicago, IL.

The ratings of HCSC Group reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).

The ratings of HCSC Group also reflect its continued favorable balance sheet strength despite recent operating performance challenges experienced in 2025. The company’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). HCSC’s consistent capital and surplus growth, driven by historically favorable net income accretion, has generally outpaced premium growth and driven increased risk-adjusted capitalization. AM Best expects that HCSC’s absolute capital will decline somewhat in the near-term given expected operating losses through year-end 2025; however, AM Best still expects HCSC’s BCAR to remain at the strongest level. Furthermore, HCSC has demonstrated ample contingent liquidity and strong financial flexibility through numerous sources, including its available cash position, and its five-year, $1.25 billion senior unsecured revolving credit facility with a consortium of banks along with its borrowing capacity under the Federal Home Loan Bank of Chicago (FHLB) of over $2.0 billion.

AM Best notes that HCSC’s statutory financial leverage increased recently to just under 20%, due to a new debt issuance in 2024 and FHLB debt in 2025, but remains within acceptable ranges for the ratings. In addition, HCSC’s earnings before interest and taxes interest coverage ratio has historically been strong prior to 2025. Further, HCSC has reported strong operating cash flows through the latter part of 2025. HCSC’s invested assets are held predominantly in investment grade fixed income securities and cash/cash equivalents, and there are no material exposures, as its investment portfolio is quite liquid and has been managed with relatively low risk.

HCSC’s acquisition of The Cigna Group’s Medicare and CareAllies businesses closed in the first quarter of 2025. As expected, this transaction had a limited impact on HCSC’s overall balance sheet strength metrics. The transaction has expanded HCSC’s geographic diversification footprint, with the addition of business outside of HCSC’s core Blue-branded states and added diversity within its Medicare Advantage and supplemental health lines of business. Additionally, HCSC has gained new network relationships, membership expansion and revenue growth, all of which offers additional competitive advantages, scale and capabilities.

Prior to 2025, which has been a challenging year across the industry, HCSC had reported fairly consistent revenue growth and solid operating earnings in most of its business segments, with double-digit revenue growth during 2024, even before the Cigna-related acquisition. Operating revenue growth has been driven by both organic and external opportunities, via a combination of new business expansion, membership growth and premium rate increases. Significant growth has recently been driven by membership growth across most lines of business, with HCSC’s commercial, individual and family enrollment gains more than offsetting the attrition that occurred in the Medicaid segment from the redetermination process and membership acquired from the Cigna-related acquisition. Overall earnings, although solid through year-end 2024, have been impacted on an underwriting basis by higher-than-expected utilization, claims costs, and member acuity across all lines, driven by a mix of inpatient, outpatient, pharmaceutical cost trends, as well as a shift in membership mix related to Medicaid redetermination and the change in this membership population. This trend was observed during the fourth quarter of 2024, after pricing was already established for 2025.

Throughout 2025, and into the later part of that year, the organization’s underwriting performance worsened, driven by a combination of factors. Revenues were equally distributed throughout the year, so with the increasing claims costs HCSC typically reports higher than targeted margins in the first half of the year and lower in the latter half. Deterioration was expected from second quarter of 2025 to the third quarter of 2025; however, not to the extent of the actual third quarter loss. The full year has been impacted by continued higher claims trends, both at HCSC and across the industry. For 2026, HCSC has repriced its business and refined strategies across its various lines, to improve operating results.

HCSC’s market leadership position in its five core Blue Cross states provides a foundation for further membership growth across multiple lines of business. HCSC’s portfolio includes owned and affiliated companies that provide the organization with added diversified capabilities. HCSC can provide a comprehensive suite of solutions for complex and chronic conditions to drive down the cost of care.

The ratings of HCSC Medicare & Supplemental Group’s reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile, appropriate ERM and the financial and operational support of its parent.

These entities were acquired by the parent organization, HCSC, during the first quarter of 2025, and include Medicare Advantage, Medicare Part D, Medicare Supplement and Care Allies businesses.

While capitalization was previously managed at lower levels for some HCSC Medicare & Supplemental Group entities, capital levels have been bolstered throughout 2025. HCSC has committed to fund additional capital in the future to support growth, novated business and additional projected acquisition related costs and operating losses. HCSC Medicare & Supplemental Group’s BCAR is projected to remain at the strongest level at year-end 2025.

HCSC Medicare & Supplemental Group’s balance sheet strength assessment of very strong reflects the sound consolidated absolute capital position of the group, its relatively modest underwriting leverage at 3.6 times and strong liquidity measures. Invested assets are invested similarly to HCSC, and conservatively allocated, held largely in investment grade fixed-income securities.

The HCSC Medicare & Supplemental Group has contributed substantially to net premium growth in core target Medicare Advantage and supplemental markets for the organization, driven by membership growth across its suite of product offerings. This should help the broader organization offset attrition in its Medicaid line of business, as growth in the Medicare-related business is expected to continue. AM Best notes that consolidated underwriting and net income trends have been very challenged by changes to Medicare reimbursement and a higher-than-expected medical cost trend, both of which are expected to continue into 2026. Management is focused on premium optimization, Star ratings and risk payment, as well as cost and expense management and efficiencies across its various Medicare Advantage plans as a part of improving future performance. Investment income has been steady and will remain a meaningful contributor to net earnings.

HCSC Medicare & Supplemental Group’s core offerings are Medicare Advantage, Medicare Part D and Medicare Supplement products, which are offered across numerous states that are outside of the parent’s core market. The group has exhibited consistent historical membership growth in its main markets driven by government business, primarily Medicare Advantage, Medicare supplement and Medicare Part D, and other supplemental accident & health (A&H) offerings, which should complement and bolster its diversification.

The HCSC Medicare & Supplemental Group’s ERM program is integrated and managed at the ultimate parent level at HCSC, and is well-developed with a comprehensive risk identification, monitoring, mitigation and oversight process.

Finally, these entities benefit from rating enhancement as part of the parent HCSC, which is expected to provide financial support if necessary. In addition, these entities will be managed with a consolidated cost structure that management expects to lead to improved profitability and economies of scale over time and will expand HCSC’s geographic presence and diversification with the addition of business. The new membership base and revenues will aid in providing additional scale and capabilities to HCSC’s Medicare Advantage and supplemental health segments.

AM Best has affirmed the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” (Superior) with stable outlooks for the following members of HCSC Group:

• Dearborn Life Insurance Company
• Dearborn National Life Insurance Company of New York
• GHS Health Maintenance Organization, Inc.
• GHS Insurance Company
• Health Care Service Corporation, a Mutual Legal Reserve Company
• HCSC Insurance Services Company
• Health Care Service Corporation-Texas HMO Line of Business

• Health Care Service Corporation-Illinois HMO Line of Business

AM Best has also affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) with stable outlooks for HCSC Medicare & Supplemental Group’s Members:

• HealthSpring National Health Insurance Company
• Bravo Health Mid-Atlantic, Inc.
• Bravo Health Pennsylvania, Inc.
• HealthSpring of Florida, Inc.
• Medco Containment Life Insurance Company
• Loyal American Life Insurance Company
• Provident American Life and Health Insurance Company
• American Retirement Life Insurance Company
• Medco Containment Insurance Company of New York
• HealthSpring Life & Health Insurance Company, Inc.
• HealthSpring HealthCare of Colorado, Inc.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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Joseph Zazzera
Director

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Senior Director

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Source: AM Best