Fitch: Near-Term U.S. Health Insurance Rtg Actions Not Expected Following Supreme Court's Decision

Fitch Ratings said today that it does not expect to take rating actions on U.S. health insurance and managed care companies based on this month's anticipated U.S. Supreme Court ruling regarding challenges to various aspects of the Patient Protection and Affordable Care Act (PPACA).

In a report published today, the agency said that it believes that interactions between aspects of the PPACA that may be affected by the court's decision and key considerations in Fitch's ratings process are so uncertain that tying near-term rating changes to the court's decision would be inappropriate. Any rating implications are expected to develop over time.

Fitch's report outlines three scenarios that could result from the Supreme Court's decision and the potential near-term and long-term impacts. The report also discusses the potential for states to enact their own legislation containing provisions that are similar to aspects of the PPACA in the event the court's decision effectively overturns large portions of the act.

Fitch's ratings on health insurance and managed care companies continue be roughly one notch lower than those of life and non-life insurance company peers. The agency's long-held concern is that efforts to advance public policy goals, such as increasing healthcare access and reducing costs, could adversely affect health insurance and managed care companies' ability to manage their business and hinder their ability to generate cash flow supporting debt obligations.

Fitch believes that health insurers and managed care companies' business models, particularly those companies with comparably stronger care management capabilities, will remain viable regardless of the court's decision. Facilitating efficient healthcare access and managing healthcare costs is essential to the U.S. healthcare system and Fitch believes that companies that contribute to these goals will continue to play an important role going forward.

To date, Fitch has observed few discernable changes in health insurance and managed care companies' financial results that can be attributed directly to the PPACA. While medical loss ratios reported in regulatory filings have trended upward in response to minimum requirements, key GAAP basis metrics, such as quarterly growth in managed care premiums and quarterly EBITDA-based margins, interest coverage ratios, and leverage ratios, have not changed meaningfully since various portions of PPACA were implemented.

The report titled 'Healthcare Reform Update - Insurance' is available on the Fitch web site 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'2012 Outlook, U.S. Health Insurance and Managed Care'

(Dec. 14, 2011);

--'Insurance Rating Methodology' (Sept. 22, 2011);

--'Health Insurance and Managed Care (U.S.) Sector Credit Factors (March 28, 2012).

Applicable Criteria and Related Research: Health Care Reform Update -- Insurers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681714

2012 Outlook: U.S. Health Insurance and Managed Care

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659847

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=674555

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