OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and downgraded the financial strength ratings to B (Fair) from B+ (Good) and the issuer credit ratings to “bb+” from “bbb-” of the Health Insurance Plan of Greater New York (HIP), HIP Insurance Company of New York, Group Health Incorporated (GHI) and ConnectiCare, Inc. (ConnectiCare) (Farmington, CT). Each rating has been assigned a stable outlook. All companies are subsidiaries of EmblemHealth, Inc. and domiciled in New York, NY, unless otherwise specified.
The downgrade reflects the sizeable decrease in risk-adjusted capital in 2014 at HIP, the lead operating company, as well as operating and net losses in 2015 that adversely impacted capital. All insurance entities within the organization are subsidiaries of HIP. Due to substantial operating losses over the past two years, HIP’s capital position has declined significantly. Additionally, HIP’s capital has also been negatively impacted by unrealized losses from the decline in valuation of its subsidiaries due to their unfavorable operating results. Underwriting losses for the organization were predominantly reported by HIP and GHI, which are the organization’s core-operating entities for its New York business. Furthermore, these losses were driven mainly by the organization’s health maintenance organization (HMO) and Medicare Advantage products, which had previously been the organization’s main earnings driver.
EmblemHealth is working to reduce its medical expenditures through initiatives that address both unit cost and utilization. To that end, the organization is working to develop products for its New York City health insurance operations with its multi-specialty physician group partner, AdvantageCare Physicians (ACPNY). ACPNY’s physicians and specialists operate through locations across New York City and Long Island. ACPNY provides quality, cost efficient care, which can benefit the members of HIP and GHI while improving operating results. EmblemHealth also has historically had a high administrative expense ratio compared with peer companies. The company has embarked on multiple initiatives to create operational efficiencies and reduce administrative costs. Operating losses across the organization have shown considerable moderation in 2015 and into the first quarter of 2016 with further improvement projected for the rest of the year. Nevertheless, a return to profitability and organic capital growth is not expected to resume in the current year.
EmblemHealth continues to hold a solid share of its core market and is growing enrollment in Connecticut. Through HIP and GHI, the organization holds a solid market share in the Greater New York City area, which includes the City of New York account. Furthermore, ConnectiCare and its subsidiaries have reported material enrollment gains over the past two years driven by individual and Medicare Advantage membership gains.
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