OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “bbb” of Health Net of California, Inc., Health Net Life Insurance Company (both of Woodland Hills, CA), Health Net Health Plan of Oregon, Inc. (Tigard, OR) and Health Net of Arizona, Inc. (Tempe AZ). The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has withdrawn the Long-Term ICR of “bb” of Health Net, Inc. (Delaware), now an intermediate holding company within the Centene Corporation (Centene) [NYSE: CNC]. Furthermore, Health Net Inc.’s $400 million 6.375% senior unsecured notes due 2017 were called in fourth-quarter 2016. In addition, Health Net, Inc. will no longer be preparing external financial statements.
The rating affirmations reflect the financial and operational support provided to the Health Net companies by its parent, Centene. The March 2016 Health Net acquisition established Centene as a leader in three of the largest Medicaid states, which include California, Texas and Florida, one of the country’s largest Medicaid managed care organization and a major provider of managed long-term support services. The Centene organization provides the Health Net entities with increased capabilities, enhanced systems and a platform for expanded growth. In addition, Centene has provided capital contributions to the Health Net group of insurance companies when necessary.
During 2016, the Health Net companies’ operating results were challenged by the health insurer’s fee and write-down of the risk corridor receivable related to the Patient Protection and Affordable Care Act. In addition, premium deficiency reserves were established due to claim experience. However, the organization has taken corrective actions in product design and pricing to improve future results. Furthermore, the operating losses placed additional pressure on risk-adjusted capitalization, resulting in a number of capital infusions from Centene. A.M. Best expects continued capital support going forward, should it be necessary. A.M. Best also notes that there may be potential challenges to successfully integrate the organizations to realize anticipated benefits.
This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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