The rating upgrades reflect the support Florida Blue offers to CHP and FHCP through reinsurance and guarantee agreements, as well as the increased role of a low cost delivery model that is at the core of both CHP and FHCP.
The affirmation of the ratings for Florida Blue and HOI reflects their continuous profitable financial performance. Florida Blue has posted positive operating results for the last 25 years. Pricing discipline combined with a controlled administrative expense structure, innovative provider contracting and enhanced medical management contributed to earnings over the last four years. In addition, during 2013, net income was further supported by a sizeable positive tax settlement. Solid operating performance contributed to the company’s very strong level of capitalization that provides a competitive advantage and significantly improves Florida Blue’s flexibility to respond to market challenges related to the implementation of The Patient Protection and Affordable Care Act (PPACA). Florida Blue’s leadership in the individual market—with a wide range of products offered, retail presence and strategic repositioning of the Blue brand towards greater affordability and simplicity—puts it in a position to succeed in a post-reform environment. Florida Blue is likely to further enhance its strength in the individual segment through active participation in the
Offsetting rating factors include the substantial decline in underwriting results during 2013 as the company was pricing closer to trend to preserve affordability and grow membership. Florida Blue expects future returns to remain modest due to market changes, increased competition, affordability focus and the impact of PPACA industry fees beginning in 2014. In addition, the company’s active presence in the public exchange market place may expose Florida Blue to some degree of adverse selection and unfavorable financial results. Furthermore, as a result of a major organizational change and creation of a new mutual holding company, which became the parent of Florida Blue in 2014, the level of risk-based capitalization at Florida Blue is expected to decline substantially following the transfer of
Positive rating actions are unlikely in the near term. Factors that could lead to negative rating actions include a substantial deterioration in the organization's risk-adjusted capitalization, sizeable membership losses and a significant decline in operating performance.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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