AM Best Downgrades Credit Ratings of Health Alliance Medical Plans, Inc. and Health Alliance-Midwest, Inc.; Places Credit Ratings Under Review With Negative Implications

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Ratings to “bb” (Fair) from “bbb-” (Good) of Health Alliance Medical Plans, Inc. and its wholly owned subsidiary, Health Alliance-Midwest, Inc. Concurrently, these Credit Ratings (ratings) were placed under review with negative implications. Both companies are domiciled in Champaign, IL, and collectively are referred to as Health Alliance.

The ratings reflect Health Alliance’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). In addition, the ratings consider the support provided to the organization by its ultimate parent, The Carle Foundation, as Health Alliance plays an integral role within The Carle Foundation’s integrated health care delivery system.

The rating downgrades are attributed to a 27% decline in capital and surplus through the third quarter of 2023 from year-end 2022, along with a projected decrease at year-end 2023 in the level of risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). The decline was driven by a higher-than-projected net loss impacted by continuing higher-than-expected cost and utilization trends. Losses in the first three quarters of 2023 follow growing underwriting and net losses in 2021 and 2022. Additionally, the underwriting and net losses reported through the third quarter of 2023 were greater than AM Best had expected, leading to concern that the losses may accelerate through the fourth quarter, similar to 2022.

The placement of these ratings under review with negative implications reflects AM Best’s concerns about the uncertainty regarding the improvement in Health Alliance’s risk-adjusted capitalization, materially higher-than-expected net losses projected at year-end 2023 and additional financial support from the parent, The Carle Foundation. AM Best will monitor the status of the organization’s operating performance and balance sheet position as the company implements corrective measures.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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