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Thursday, January 23, 2014

Moody Downgrades Insurers

Over Uncertainty from Obamacare


Credit rating conglomerate Moody’s today lowered its outlook for U.S health insurers today from “stable” to “negative,” citing Obamacare’s implementation as continuing to create uncertainty for the industry.
“While we’ve had industry risks from regulatory changes on our radar for a while, the ongoing unstable and evolving environment is a key factor for our outlook change,” Stephen Zaharuk, a Moody’s senior vice president, said in a release from Moody’s Investors Service.
He noted that the Obama administration for the last few months has imposed new regulations and last-minute changes on insurance plans that have created “operational changes well after product and pricing decisions were finalized.”
Moody’s pointed to Obamacare’s young adult enrollment as a top uncertainty. So far, only 24 percent of enrollees in the Obamacare exchanges are young adults aged 18 to 34, according to the most recent report from the Health and Human Services Department. That number is well short of the Obama administration’s original goal of 38 percent young adult enrollees, which would be needed to make the participant pool in Obamacare exchanges work.
Additionally, Moody’s said the impact of an industry assessment tax on health insurers that starts this year was still unclear. “[W]hile some insurers built this tax into their premium calculations, the amounts received may still be insufficient to cover their share of the assessment,” the credit agency said.
Moody’s forecasted a reduced net earnings margin for health insurance stocks of 2 percent in 2014, compared with an average of 3 percent in 2013. Overall membership growth for U.S. health insurers is expected to drop to 1 percent for 2014, down from 3 percent growth in 2013.
The rating downgrade comes one day after Mark Bertolini, Chairman, President, and CEO for health insurer Aetna, expressed worries that Obamacare wasn’t enrolling enough uninsured Americans.
His comments reflected findings from a McKinsey & Co. survey that estimated only 11 percent of Americans buying plans on the Obamacare exchanges were previously uninsured, while more than two-thirds of Obamacare enrollees previously bought their own coverage or had an employer-sponsored health plan.

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