Fitch: Effects of ACA Vary but Credit Implications are Universally Limited

CHICAGO--()--The Affordable Care Act (ACA) will have limited credit implications for large corporate issuers in the U.S., according to a Fitch Ratings report published today. Moreover, following discussions with corporations across various industries in Fitch's rated universe, incremental costs from ACA are expected to be mainly immaterial and few firms are seriously considering pushing employees onto government health insurance exchanges (HIEs).

Fitch notes that restaurants and retailers will be most affected by ACA because firms in these industries employ low-wage employees that tend to be uninsured. Under ACA, many lower paid workers will now qualify for coverage under employer-sponsored health insurance plans or seek coverage on government HIEs set to open on Oct. 1, 2013. Employers will not face fines under the 'pay or play' provision until Jan. 1, 2015. However, with individual penalties for not having coverage set to begin Jan. 1, 2014 and rise through 2016, ACA could become a growing burden for operators in these industries over time.

Fitch expects any financial effects for large restaurants and retailers to be manageable with increased pricing, reduction of other benefits, and shifting to more part-time staff via attrition being possible offsets. Ramifications will be greater for small retailers and restaurant franchisees that already have low operating margins. Large chain restaurants are actively working with franchise partners to educate them on their options but plans to directly subsidize incremental costs are non-existent.

Fitch is monitoring ACA's effect on the cash flow and operating strategies of issuers in foodservice and retail. In isolation, however, ACA will not be a negative ratings trigger.

The full report 'U.S. Corporates - The Varying Effects of Affordable Care' is available at www.fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research: U.S. Corporates -- The Varying Effects of Affordable Care (Financial Implications of ACA Will Vary but Credit Implications Are Universally Limited)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=716582

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Contacts

Fitch Ratings
Carla Norfleet Taylor, CFA, +1-312-368-3195
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Megan Neuburger, +1-212-908-0501
Senior Director
or
Phil Zahn, CFA, +1-312-606-2366
Senior Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Carla Norfleet Taylor, CFA, +1-312-368-3195
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Megan Neuburger, +1-212-908-0501
Senior Director
or
Phil Zahn, CFA, +1-312-606-2366
Senior Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com