News Column

Fitch: CA Insurance Hike Good for Hospitals, Insurers Uncertain

August 8, 2014



NEW YORK--(BUSINESS WIRE)-- The relatively small increase in premium rates for health insurance plans sold on California's insurance exchange plans could be positive for non-profit hospitals. However, the impact on insurers is uncertain as the rate increase is low in comparison to medical inflation and historical trends, according to Fitch Ratings. We expect the meager increases to attract more people to the plans and they suggest that other state plans will also have small rate increases.

California officials announced state-run insurance exchange plan premium rates will increase by an average of 4.2% next year after negotiations with Anthem Blue Cross, Kaiser Permanente and the other insurers on the platform concluded last week.

This comparatively modest rate increase could lead to an increase in insurance coverage as pricing is generally one of the most important factors in the decision. A higher percentage of insured would likely have a positive impact on non-profit hospitals in California.

The impact of the rate increase on California's health insurers is less clear. Favorably, if the rate increase attracts new and comparatively healthy consumers to the exchange, it could improve the risk characteristics of exchange-sourced business. Whether the rate increase is commensurate with the risk characteristics of those insured on the exchange is more uncertain.

The increase in California's average rate may be indicative of rate increases in other states. However, some variance in rate changes is inevitable as the plans are new, their initial rates varied widely and the needs of those insured vary. Yesterday Florida's largest insurer announced it will raise its exchange plan premium rates, on average, by 17.6%. However, of the 11 plans returning to that state's exchange, eight filed average rate increases and three filed rate declines.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Fitch Ratings

Mark Rouck, +1 312-368-2085

Senior Director

Insurance

70 West Madison Street

Chicago, IL

or

Emily Wong, +1 415-732-5620

Senior Director

U.S. Public Finance

650 California Street

San Francisco, CA

or

Rob Rowan, +1 212-908-9159

Senior Director

Fitch Wire

33 Whitehall Street

New York, NY

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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