Analysts at S&P Global Ratings have released a report that shows US health insurer ratings performed relatively well in 2020, despite the COVID-19 pandemic.
Analysts also believe the industry’s resilience to the pandemics effects remains to be seen in 2021, whilst predicting credit quality to hold up well.
However, this may come with a cost as insurers will undoubtedly see more risks than in most years.
To start 2021, the industry will face a new presidential administration and a Democratic-controlled Congress, which brings S&P’s prediction that one of the industry’s higher-risk scenarios, the public option, is possible but unlikely.
However, analysts think the Biden administration will take a more moderate approach of building on the Affordable Care Act (ACA), which may bode well for the industry, depending on the details.
More broadly, the US pandemic response and economic recovery will dictate health insurers’ credit story in 2021.
S&P expect weak employment, which will limit commercial group membership, will pressure the industry’s revenue growth, but growth in managed Medicaid and Medicare Advantage will offset this.
It also forecasts that the industry generally priced its products with conservatism in terms of medical costs for 2021, which should also support stable earnings. However, insurers are likely varied in their pricing assumptions–potentially creating earnings divergence among insurers in 2021.