Fitch: Rating Outlook Remains Stable for U.S. Health Insurance and Managed Care Sector

Link to Fitch Ratings' Report: 2013 Outlook Report: U.S. Health Insurance and Managed Care
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695952

Fitch Ratings announced today that its rating outlook for the U.S. health insurance and managed care sector remains stable.

Fitch's financial projections for the sector over the next one to two years remain broadly supportive of existing ratings despite modestly declining margins and higher financial leverage. As a result, most health insurance and managed care companies' ratings are likely to be affirmed over that time.

The sector's ratings over the near term are likely to be unaffected by the uncertainty from the 'fiscal cliff' and ongoing implementation of the Patient Protection and Affordable Care Act (PPACA). Revenues and capitalization in the sector are sufficiently insulated from potential macroeconomic effects of the fiscal cliff. Fitch believes that health insurers will continue to successfully manage changes brought about by PPACA's eight-year implementation.

Acquisition activity is likely to continue as health insurers and managed care companies look to add technological capabilities, membership, and scale in an effort to overcome ongoing margin pressure. In addition, the increasingly blurred roles between payers, providers, and hospital systems could become more prevalent as the healthcare system strives to better align interests to reduce costs and manage care.

Factors that could change Fitch's rating outlook to negative include U.S. deficit reduction efforts that result in significant changes to Medicare or Medicaid funding and erode the sector's profitability, a sustained increase, likely tied to acquisition activity, in financial leverage, and a reduction in premium rate adequacy derived from unforeseen impacts of PPACA or from Medicare/Medicaid reform.

Fitch believes that a move to a positive outlook is unlikely. Notwithstanding PPACA's ongoing implementation, Fitch expects the sector to continually be subject to political and legislative concerns that effectively prohibit widespread positive rating momentum.

The report '2013 Outlook: U.S. Health Insurance and Managed Care' is available on the Fitch web site 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 19, 2012);

--'Health Insurance and Managed Care (U.S.) Sector Credit Factors' (Aug. 21, 2012).

Applicable Criteria and Related Research:

Insurance Rating Methodology -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=692293

Health Insurance and Managed Care (U.S.) Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686930

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