Best’s News & Research Service - July 06, 2016 02:07 PM (EDT)
A.M. Best Upgrades Ratings of Priority Health
- July 06, 2016 02:07 PM (EDT)
Oldwick //BestWire// - A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit ratings to “a” from “a-” of Priority Health and its subsidiary, Priority Health Choice Inc. (PH Choice) (both domiciled in Grand Rapids, MI). The outlook for each rating has been revised to stable from positive.
The rating upgrades of Priority Health reflect the health plan’s consistently favorable premium and operating earnings trends, as well as organic capital growth and a sound level of risk-adjusted capital. Additionally, Priority Health is strategically aligned with and has the financial support from its majority owner, Spectrum Health System (Spectrum Health). Priority Health’s premium growth has been the result of material enrollment gains in its individual, Medicare and Medicaid segments. The plan has reported a trend of favorable operating results over the past five years mainly driven by its commercial and Medicare business, although recent results showed profitability in all lines of business including Medicaid. Positive net income has contributed to a good level of organic capital growth over several years through retained earnings, leading to a solid level of risk-adjusted capital. Priority Health is majority owned by Spectrum Health, a financially strong health care system. Priority Health is a significant contributor of consolidated revenue and earnings for Spectrum Health.
Offsetting rating factors include reimbursement challenges in government-funded product lines, risk associated with individual exchange business and margin compression. As Priority Health grows its Medicare and Medicaid business, it will be more exposed to a potential decrease in funding and reimbursement rates experienced in federal and state government programs. Priority Health continues to see enrollment growth in its individual exchange business. Although Priority Health has not seen unfavorable results from this segment, individual exchange business has developed unfavorably as compared with expectations at the introduction of the Affordable Care Act, similar to industry trends. Also, A.M. Best notes that Priority Health’s operating margin is expected to compress going forward, as the organization strategically reinvests capital into growing the company and enhances its medical management capabilities. Moreover, as government-sponsored business becomes a larger portion of total enrollment, overall margins are expected to decline as these products typically produce lower margins.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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