OLDWICK, N.J.--(BUSINESS WIRE)--AM 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 Health Alliance Medical Plans, Inc. (HAMP) (Champaign, IL) and its wholly owned subsidiary, Health Alliance-Midwest, Inc. (Midwest) (Champaign, IL) (collectively referred to as Health Alliance). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect Health Alliance’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The rating upgrades reflect favorable operating performance over the past few years. Health Alliance reported underwriting gains in 2019, primarily driven by solid gains in its individual and state lines of business. A change in the mix of business also has improved margins, resulting in an increase in 2019 operating gains. Additionally, the health plan has products competitively priced in the market to grow membership. Health Alliance has diversified revenue sources through its growing self-insured membership block and expansion into markets outside of Illinois. AM Best expects that earnings for 2020 will be within the projections provided by senior management.
The trend of favorable net gains has contributed to absolute capital and surplus growth. Health Alliance has improved its balance sheet strength, as measured by Best’s Capital Adequacy Ratio (BCAR); however, the investment portfolio is exposed to an elevated level of equity holdings and may be subject to market volatility. Health Alliance’s high allocation of equities presents some investment concentration risk.
The ratings also reflect the Health Alliance’s strategic role as the main subsidiary of The Carle Foundation, a fully integrated health care delivery system that enhances Health Alliance’s overall assessment. The financial flexibility of The Carle Foundation adds strength to Health Alliance’s balance sheet. The Carle brand is widely recognized in the markets in which Health Alliance’s integrated health insurance products are sold.
Health Alliance mainly serves rural and midsize markets outside of the greater Chicago counties, which have not seen a high pandemic infection rate. To date, the COVID-19 pressures have not strained the hospital systems in Illinois, unlike other parts of the country that are undergoing spikes in reported cases. Initially, the health plan experienced a drop in utilization as stay-at-home measures were implemented and members put off nonessential procedures. Since the measures have eased, a more normal claims pattern has returned.
Health Alliance’s business profile is limited primarily due to the concentration of its membership around its parent organization’s service area. In addition, the large premium associated with the Illinois state account poses concentration risk for Health Alliance, which has benefited from the large scale of the account from a premium and profitability perspective. The account is up for renewal in 2021; therefore, AM Best will monitor the progress of the forthcoming Illinois health business renewal process. The health plan has ventured into other markets; however, at this time, Health Alliance’s strategic growth initiatives are developing and not at scale.
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