Fitch Ratings revised its outlook for U.S. health insurers for 2018 from negative to stable, projecting the industry will maintain stable financial leverage and strong operating performance.
Here are four things to know about the outlook revision.
1. Fitch anticipates its most common health insurance rating actions next year will be affirmations. However, the agency projects the number of downgrades it issues will outnumber potential upgrades.
2. Bradley Ellis, director of North American insurer ratings at Fitch Ratings, said, "Operating performance among sector participants was generally stronger than expected this year and will continue into 2018. Moreover, the termination of two very large merger agreements during the year kept M&A-driven leverage down."
3. Acquisitions aimed at diversifying enrollment, competencies or care delivery capabilities will continue within the sector, though on a relatively smaller scale.
"The wildcard for rating actions in 2018 will be the ongoing transformation within the broader healthcare industry, which could drive significant M&A activity that will likely involve health insurers over the near- to intermediate-term," Mr. Ellis added. "The CVS-Aetna merger announcement on Dec. 3 is an example of such consolidation."
4. Fitch notes credit concerns for health insurers in 2018 include regulatory and political uncertainties and tax reform, which may cut federal funding for Medicaid and Medicare.
More articles on payer issues:
Highmark CEO David Holmberg: 'Everyone should have access to UPMC specialty hospitals regardless of insurer'
Mission Health, BCBS end nearly 6-month spat with new contract: 3 things to know
CVS Health to pay Aetna $2.1B if deal fails: 3 things to know