S&P Global Ratings has maintained its stable outlook on the US health insurance sector for 2020, with limited rating movement expected over the coming year.
Analysts noted that about 90% of insurer ratings currently have stable outlooks in this sector, and near term macroeconomic factors and cost trends should help to support their performance and capitalisation.
Meanwhile, publicly traded health insurers coming off large merger and acquisition (M&A) deals are expected to lower leverage to their long-term targets.
S&P believes industry M&A will continue as competition heats up for Medicare, Medicaid, spurred by an aging population, socioeconomic trends, and gradual Medicaid expansion.
Other factors to consider this year include legal challenges and potential changes in policy and regulation.
“A split Congress is unlikely to pass major health care legislation in a general election year,” said S&P Global Ratings credit analyst Deep Banerjee. “However, states will continue to make tweaks that affect local enrollment and costs.”
Over the next decade, S&P considers the likelihood of another round of federal reform to be high, but the timing is equally uncertain.
Business models may also shift in the coming decade, analysts said, as pure-play health insurers expand their business models to grow and acquire more health care services.
Employers facing increasing costs will similarly be key proponents of disrupting traditional health care contracting and delivery models.
Additionally, advances in medical science could disrupt the current health care structure, and S&P views the use of artificial intelligence and advanced technology as increasingly important to maintain a competitive edge and defend market share.
Climate risk is seen as another component of the long-term outlook for US health insurers, with climate change likely to require newer approaches to morbidity management and health care access.
