Health insurers stable, M&A seen diminishing in 2020: Fitch

By | December 12, 2019

Dive Brief:

  • The outlook for the health insurance sector remains stable heading into 2020, Fitch Ratings reports.
  • The ratings agency maintains a stable outlook on the “vast majority” of the companies it rates within the U.S. health insurance industry, which includes UnitedHealth Group and Aetna.
  • The insurance sector continues to benefit from “low unemployment, manageable medical cost trend and solid growth in government-funded business,” Brad Ellis, senior director for Fitch, said in the report.

Dive Insight:

Even anticipating an increase in the growth of U.S. health expenditures, Fitch expects insurers to deliver solid operating results, including improved medical loss ratios, for 2020.

There is even a chance for insurers to garner positive ratings outlooks as many look to continue to execute on merger integration and deleveraging, according to Fitch. 

Thanks in part to the return of the health insurance fee, Fitch expects medical loss ratios to drop to 82.5% in 2020. A decrease from the expected 83.9% for the full year of 2019 for the nation’s eight largest publicly traded insurers, which cover about 165 million people, according to Fitch. 

MLR is an important measure, showing the amount an insurer spends on medical claims as a percentage of premiums. Lower MLRs leave more room for covering administration costs and garnering profit.

Even an upcoming election year and a slate of Democratic presidential hopefuls touting support to expand Medicare, the agency does not expect seismic changes to the system.

“Healthcare will certainly continue to be one of the most prevalent discussion topics among candidates for the U.S. presidency in 2020, but Fitch does not anticipate significant change in the structure of the U.S. healthcare system over the next couple of years,” the report said.

The agency also said it expects major mergers to slow significantly in 2020. The insurance sector has experienced significant M&A activity over the last few years, including CVS Health’s buy of Aetna and Cigna’s acquisition of Express Scripts. Centene is near closing on its purchase of rival WellCare.

Read More:  What Are The Health Benefits Of A Massage?

Fitch expects consolidation activity next year to focus more on “modest build-out of care delivery opportunities in various regions or care management and technology initiatives.”

Healthcare Dive – Latest News