Both large and small U.S. health insurers are feeling the effects of weak margins on enrollees who obtain their health insurance coverage under the Affordable Care Act's exchange-based system, according to Fitch Ratings.
Reflecting pressure from exchange-compliant products, UnitedHealth Group revised its 2015 earnings per share guidance downward last week. However, no other major health insurers have issued downward profit revisions.
The credit rating agency believes "large and geographically diverse health insurers are unlikely to experience credit problems from the weaker margins of exchange-sourced business, as it will unlikely become a significant portion of these large firms' overall business." However, "health insurers with single- or limited-state membership concentrations could have their ratings affected due to higher relative contributions from exchanged-sourced business," said Fitch.
Small health insurers are seeing severe effects from exchange membership, with underwriting losses causing numerous health insurance co-ops to shut down.
"Downward earnings revisions…and the failure of various co-ops may add skepticism about the workability of exchange-sourced memberships and the viability of the risk pools formed via exchange membership," said Fitch.
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