A.M. Best Special Report: Nearly All 2015 U.S. Life/Health Impairments Were Affordable Care Act Co-Op Plans

OLDWICK, N.J.--()--Of the seven U.S. life/health financial impairments recorded in 2015, six were consumer operated and oriented plans, known as co-ops, formed under the Affordable Care Act (ACA), according to a new A.M. Best special report.

The Best’s Special Report, titled, “2015 Life/Health Impairments Update,” states that over a 16-year period from 2000-2015, 143 life/health insurers became impaired. Of these 143 impairments, 70% were accident and health or health insurers, while 16% were small life insurers primarily focused on selling lower policy value industrial/burial or stipulated premium business in the southern United States. The remaining 14% were fraternal entities, annuity writers and other life or combined life, annuity and health businesses.

In contrast to A.M. Best’s prior studies, impairments were defined as being situations in which a company has been placed, via court order, into conservation, rehabilitation and/or insolvent liquidation. Supervisory actions undertaken by insurance department regulators were not considered impairments for this study unless limitations were placed on payment of policyholder obligations.

Specific causal factors were identified for 34 of the impairments. Fraud or alleged fraud was present in nine of the impairments, while eight impairments were caused at least in part by significant investment losses. Six companies ran into difficulty after experiencing rapid growth, eight were undone by affiliate problems, and one became impaired after reinsurance failure. One impairment resulted from large claim overpayments due to system errors, and one other impairment involved a mortgage lender that failed after an unlicensed push into fixed rate annuity products.

There were 76 health insurer impairments during the study period. Of these, 66 occurred in companies doing business in one state while another five wrote in two to five states. The last time there were seven or more health insurer impairments was in 2008, when there was also seven impairments. Other than the six co-op impairments, a Wyoming-based health insurer represented the seventh impairment of 2015.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=254775.

To access a copy of the property/casualty impairments special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=254754.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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Contacts

A.M. Best
Kenneth Frino
Managing Director
+1 908 439 2200, ext. 5012
kenneth.frino@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

A.M. Best
Kenneth Frino
Managing Director
+1 908 439 2200, ext. 5012
kenneth.frino@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com