Moody's: Health insurer mega-mergers to disrupt entire sector

U.S. health insurers will have strong financial results in 2016, but challenges like the disruption from high-profile mega-mergers, will offset positive trends in the credit risk profiles of health insurers, according to Moody's Investors Service.

Moody's analysts are encouraged by health insurers' membership growth in the first nine months of 2015. During that time, health insurers rated by Moody's reported overall organic membership growth of 5.3 million members, with almost 4 million of that growth in the government segments.

"In spite of the difficulties of implementing the ACA and weathering a slow economic recovery, U.S. insurers have been able to maintain solid membership growth and strong earnings," said Moody's Senior Vice President Steve Zaharuk.

Moody's outlook for the health insurer sector will remain stable, as payers will benefit from strong membership growth in the government segments and disciplined pricing over the next 12 to 18 months.

However, the positive trends will be offset by the continued underperformance in 2016 of individual commercial plans sold on the Affordable Care Act exchanges and potential disruptions from mergers. Moody's said the sector as a whole will be disrupted by three major mergers announced in 2015: Aetna-Humana; Anthem-Cigna; and Centene-Health Net.

"Last year's mega-mergers are going to have long effects in 2016 and beyond," said Mr. Zaharuk. "The six insurers involved in these deals currently cover 92 million members, all of whom could be affected by possible disruptions in service or networks as the integrations move along."

The three health insurer mergers are projected to close during 2016.

More articles on payer issues:

Q3 comparison: 9 things to know about how 7 major payers stack up
Florida insurance regulators give Aetna-Humana merger the green light
Cigna CFO says ACA exchanges could be beneficial to insurers

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