OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Ratings to “a-“ from “bbb+” of PacificSource Health Plans (PHP) (Springfield, OR). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect PHP’s balance sheet strength, which A.M. Best categorizes as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.
The rating upgrade also reflects the growing benefit the company receives due to its strategic role within an integrated health care delivery system as part of PacificSource and Legacy Health. In 2016, Legacy Health purchased 50% of PHP for $247.5 million, with $100 million contributed in 2016 and the remaining amount to be paid over the following five years. In addition to these capital contributions and benefits from Legacy Health’s strong financial position, the integration with Legacy Health presents substantial competitive advantage and drives closer relationships with providers in key geographic regions, including areas where PHP had very limited presence prior to its affiliation with Legacy Health. Furthermore, Legacy Health became one of PHP’s largest self-funded accounts, providing PHP with additional scale. PHP posted net losses for the past several years; however, operating performance turned profitable in 2017, driven by organic growth and rate increases. PHP’s overall premium is modestly diversified across its subsidiaries and geographic regions, including Montana and Idaho. Product diversification is achieved through profitable growth of Medicare Advantage and Medicaid business written at PHP’s wholly owned subsidiaries. A.M. Best expects operating margins to remain relatively stable in the near term, as the organization continues to leverage its unique provider-partnership models.
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