Three of the health plans administered by Regence – in Utah, Oregon and Washington experienced underwriting losses that exceeded $260 million since 2011, which led A.M. Best – an insurance rating service – to give Regence a negative rating.
In its press release, A.M. Best analysts said, “The Regence plans continue to face a decline in fully insured enrollment, and a lack of revenue growth due to a combination of challenging competitive environment and strategic choices. Overall enrollment at the Regence plans has experienced a substantial decrease over the past five years, driven by competitive pressures and Cambia Health Solutions corporate strategy to reduce exposure to certain market segments, with a focus on capital preservation rather than membership growth. As a result, the share of fully insured membership at the Regence plans has been gradually declining, while a self-funded segment with much lower revenue and margin potential has expanded. A.M. Best is concerned that the Regence companies will remain challenged to grow its revenue and earnings and subsequently maintain its market position given the changed profile of its membership base“
As far as LifeMap is concerned, its rating affirmations reflect a good level of risk-adjusted capitalization, diversified product portfolio and support of its minority owner, Regence BCBSO, through a full guarantee, according to the release. “The negative outlooks reflect persistent underwriting and operating losses, as well as the difficulty in achieving profitable growth in its core segments.”
At the same time, the rating agency upgraded the financial strength of the Regence plans and its issuer credit ratings, and assigned an excellent rating to its subsidiary, Commencement Bay Life Insurance Company of Seattle.
Cambia Responds
In response, Jared Ishkanian, spokesman for Cambia Health Solutions, told The Lund Report, “We are pleased to learn that our A.M. Best rating has been upgraded to ‘A’ (Excellent). This rating reflects our financial stability and the confidence our members have in us to meet their health care needs now and in the future. As noted in the announcement, A.M. Best’s “negative” outlook reflects business challenges that are being broadly felt by the healthcare industry.”
The Regence plans are among the largest health insurance carriers in their respective states, with overall enrollment exceeding 1.5 million members at year-end 2015, according to A.M Best. . “Consolidated earnings for the Regence plans remained positive, although modest, over the past
four years, as investment income and realized gains offset the underwriting losses. Favorable earnings combined with lower premium and changes in investment allocations contributed to stronger risk-adjusted capitalization. A.M. Best considers the current level of consolidated risk-adjusted capitalization to be very strong and more than adequate to cover the plans’ financial obligations.”
Diane can be reached at [email protected].
