OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of BCBSM, Inc., d/b/a Blue Cross Blue Shield of Minnesota (BCBSM) and its insurance affiliate, HMO Minnesota d/b/a Blue Plus (Blue Plus). In addition, A.M. Best has revised the outlook to negative from stable and affirmed the Long-Term Issue Credit Rating of “bbb+” on the $250 million 3.79% senior unsecured notes due in 2025 issued by BCBSM. Both companies are domiciled in Eagan, MN.
Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” of MII Life, Incorporated (MII Life) (St. Paul, MN). The outlook of these ratings remains stable.
The revised outlooks reflect BCBSM’s substantial and increased losses reported over the past two years and corresponding decline in its risk-adjusted capital for year-end 2016. The aggressive pricing pressures in the highly competitive Minnesota market have impacted underwriting earnings. The losses for BCBSM were attributed to the continued challenges and high costs involved in participating in the individual market segment of the Patient Protection and Affordable Care Act (ACA), on and off the exchange, combined with the expenses related to the technical and process implementation supporting the transition to the new operating model platform. Blue Plus reported a sizable loss driven by challenges within the individual and Medicaid markets. In addition, operating losses are projected to continue with a further decline in capital in 2017. BCBSM acknowledges exchange pricing has not been adequate and announced its exit from the ACA individual products. However, the organization will continue to maintain narrow network insurance products on and off the exchange through its affiliate, Blue Plus.
The Credit Rating (rating) affirmations of BCBSM and its subsidiary, Blue Plus, reflect its dominant market position in Minnesota, sufficient risk-adjusted capitalization and strategic plan to enhance the organization’s capabilities. BSBCM is the oldest and largest health insurer in the state and controls more than one-third of the state’s market, which includes a high share of the national accounts sector in Minnesota. As a Blue plan, the company enjoys strong brand recognition, strategic relationships with a diverse group of provider networks and a balanced product profile and earnings mix. BCBSM continues to successfully migrate members to the new BlueCore platform, which is expected to support growth and enhance efficiency.
MII Life’s rating affirmations reflect the company’s established presence in the administration of Health Spending Accounts and Health Reimbursement Accounts, along with other custodial accounts and services. Additionally, the company is provided with operational and financial support from its ultimate parent, Aware Integrated, Inc., and affiliate BCBSM. MII Life has operated as a medical spending account administrator for over 25 years and ranks as one of the leading administrators in the United States, and is positioned among the top Voluntary Employee Beneficiary Association administrators. The company has reported continued trends of growth in accounts, deposits, revenue with continued profitability over the past several years. MII life has a reinsurance agreement with its affiliate, BCBSM, Inc., which has resulted in nominal net premium volume. Partially offsetting rating factors are a very competitive consumer-driven health marketplace, concern with the underlying credit quality of some of its investment holdings and historical dependence on capital support from its parent.
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