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S&P maintains stable outlook on U.S health in 2019

10th January 2019 - Author: Matt Sheehan

S&P Global Ratings has maintained a stable outlook on the U.S health insurance sector for 2019, with a combination of favourable business conditions and financial factors offsetting key concerns and risks.

health-insuranceAnalysts noted that strong payroll employment continues to bolster the commercial segment, with the ageing U.S population driving Medicare Advantage while Affordable Care Act (ACA) exchanges appear to be stabilising and attracting new competition.

S&P also considers capital and liquidity to be strong or better for most of its rated U.S health re/insurers, which supports balance-sheet strength.

U.S health re/insurers’ operating performance also reflects sustained earnings strength and improved quality, although S&P expects profitability to moderate somewhat over 2019.

In contrast, elevated levels of large mergers and acquisitions (M&A) deals in the health sector have raised concerns about financial leverage, integration and cultural compatibility, analysts said.

Additionally, significant legislative uncertainty continues for the U.S re/insurance industry and policy risk remains high due to the administration’s preference for ACA alternatives.

Against this background, S&P expects to see growing emphasis in 2019 on payment-and-delivery reform initiatives, which also exist as core provisions of the ACA.

Greater collaboration and cooperation among players and providers is also anticipated as the industry attempts to address the nest stage of market evolution.

“A combination of still-favorable business conditions, financial factors, and diminished near-term legislative uncertainty balances our concerns relating to merger and acquisition (M&A) activity, elevated policy risk, and re-emergent legal overhang,” said S&P Global Ratings credit analyst Joseph Marinucci.

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