AM Best Withdraws Credit Ratings of PacificSource Health Plans

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the implications of the under-review status to developing from negative for the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb” (Good) of PacificSource Health Plans (PSHP) (Springfield, OR). Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as PSHP requested to no longer participate in AM Best’s interactive rating process.

The Credit Ratings (ratings) reflect PSHP’s balance sheet strength, which AM Best assesses as weak, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

These rating actions follow improvements in earnings and capitalization through the second quarter of 2025, as well as the capital contributions made through second-quarter 2025. Additionally, the under-review status considers PSHP’s detailed strategic plans for improving results that are to be executed going forward.

The under review with developing implications status also reflects its risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), which remains at the very weak level, even following the improvement in earnings and capital contributions. The company has managed capital to the minimum state regulatory requirements. The company received capital support of $25 million from PacificSource, the holding company, with additional planned contributions in the second half of 2025.

In August 2025, PSHP provided a strategic plan to AM Best aimed at improving their financial performance. These initiatives include an enterprise-wide model that addresses cost optimization through pharmacy benefit improvements, network rate optimizations and dedicated medical management. It also included specific initiatives to address financial pressures in its government lines of business, by closely working with state regulators, managing utilization and using data-driven analytics to improve health outcomes and reduce costs. The full strategic plan is anticipated to somewhat mitigate financial pressures and improve overall operational capabilities.

The amount of rating enhancement afforded through lift from one of its two 50% owners, Legacy Health, could have had a future impact on the ratings, as Legacy Health has no immediate plans to provide explicit capital support to its insurance subsidiaries to support their recent losses and capital declines.

It is uncertain whether any additional support or changes in capital support are forthcoming. The final ratings reflect the improvements through midyear 2025; however, the actions do not reflect nor anticipate any further deterioration in earnings or capital, or changes in capital support going forward. Much of the future performance and capital adequacy will be based on the ability of PSHP to successfully execute on its various strategic initiatives and to obtain additional capital support from its parent organizations to support its plans.

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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