Here are five things to know:
1. The ratings agency expects the sector’s strong operating performance will continue from 2018 into next year. Robust economic and employment conditions, as well as a moderate medical cost trend, are driving the strong results, according to Fitch.
2. In addition, CMS’ decision to improve reimbursement rates for 2019 could drive growth for Medicare Advantage programs, according to Fitch.
3. The sector’s medical loss ratio could be adversely affected by the moratorium on the health insurance fee for 2019; however, Fitch predicts that overall operating margins will not be largely affected.
4. Fitch expects health insurers’ debt service metrics will be adversely affected by debt issued to fund major mergers and acquisitions in 2018, such as CVS Health’s $70 billion takeover of Aetna and Cigna’s impending acquisition of Express Scripts.
“While additional significant deals are certainly possible in 2019, Fitch expects activity over the next year to focus primarily on buildout of care delivery opportunities in various regions,” the agency said. “Fitch believes that consolidation activity is a primary uncertainty for the sector heading into 2019.”
5. For insurers selling plans on the ACA exchanges, Fitch anticipates their operating performance may weaken in coming years after largely stabilizing in 2018. The ratings agency said the elimination of the ACA’s individual mandate in 2019 could result in adverse selection and hamper affordability.
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