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US health insurers face coronavirus risks on multiple fronts: AM Best

26th March 2020 - Author: Matt Sheehan

With coronavirus (COVID-19) spreading rapidly through the US, analysts at AM Best have warned that the outbreak could compound health insurers in the country in a number of ways.

medical pictureAccording the rating agency, health insurers face major risks not just from claims, but also from economic and operational disruptions.

From a claims perspective, AM Best continues to believe that health insurers will receive an increase in the number of claims related to the virus, as well as an increase in claims severity.

A decline in non-urgent claims as individuals may opt to avoid doctor offices and clinics could offset some of the claims impact.

These comments follow on from a report released earlier this month by AM Best, which warned of a potential rise in claims for US health insurers due to the growing number of coronavirus cases and deaths being reported across the country.

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But with the situation evolving rapidly, analysts have now updated their assessment of the sector to warn of heightened risks on multiple fronts.

In particular, AM Best highlighted lower membership and premiums from layoffs, lack of new sales, concerns regarding collection of premiums as well as reimbursements from employers for administrative services contracts, decline in investment income as well as realized and unrealized losses of invested assets.

It also noted that operational risk for health insurers is driven by the ability to process an influx of claims and inquiries from its members, although many insurers already utilize work-from-home practices.

AM Best is keeping its market segment outlook for the health insurance industry at stable, although it acknowledges the potential for deterioration in capital from an earnings and investment perspective.

However, favourable earnings the past few years have resulted in the strengthening of risk-adjusted capitalization, which should aid in withstanding the financial impact of the coronavirus.

Additionally, what would occur should hospital capacity become an issue or if the government intervenes is unknown at this time.

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