Because of turmoil in the healthcare insurance industry, A.M. Best has stopped rating the credit of nine Delta Dental insurers, the company announced.
A.M. Best withdrew rating for Delta affiliates it had been using public data to evaluate. It will continue to "interactively" rate 17 out of the 39 Delta affiliates.
The move follows A.M. Best's decision to stop rating "numerous" health maintenance organizations and Blue Cross and Blue Shield plans that had been rated based on public information.
"This rating action also is a reflection of the evolving marketplace, whereby health insurers are entering a period with a host of operational, financial, regulatory and marketplace challenges," A.M. Best said in a press release.
"The recession, the potential for healthcare reform, turmoil in the capital and investment markets and other possible changes to the industry present an operating landscape that has not been seen in many years. Competition, too, remains intense as insurers navigate a commercial market with limited growth prospects amid consolidation of both plan offerings and employer groups. Furthermore, health companies face an uncertain economic environment, which may result in declining enrollment and additional investment-related issues for the industry."
Going forward, A.M. Best expects:
- The economy will affect dental, commercial, medical and employee benefits writers because of decreasing group sizes and fewer new sales opportunities due to layoffs, consolidation, or business closings.
- Potential reform of the health care system could include changes to the industry and national exchanges to enable universal coverage and a public option, although the price tag for any legislative proposal and cost controls would likely be fiercely debated.
- Margins were lower in 2008 compared with recent years, and health insurers may have to implement cost-savings initiatives to offset declining enrollment and to reduce administrative costs.
- Insurers will institute stricter pricing discipline as they focus on improving underwriting results, the continued impact of offsetting investment losses and lower investment income, and maintaining profitability.
A.M. Best withdrew its rating on the following Deltas:
- Colorado Dental Service
- Delta Dental of Kentucky
- Delta Dental of Missouri
- Delta Dental of New Jersey
- Delta Dental Plan of Kansas
- Delta Dental Plan of New Hampshire
- Delta Dental Plan of Vermont
- Dental Service of Massachusetts
- Maine Dental Service
