OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of C+ (Marginal) and Long-Term Issuer Credit Rating of “b-” of Health Insurance Plan of Greater New York (HIP), HIP Insurance Company of New York, Group Health Incorporated (GHI) and ConnectiCare, Inc. (ConnectiCare) (Famington, CT). All companies are subsidiaries of EmblemHealth, Inc. and domiciled in New York, NY, unless otherwise specified. The outlook assigned to these Credit Ratings (ratings) is negative.
The ratings reflect EmblemHealth’s balance sheet strength, which AM Best categorizes as very weak, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management.
The negative outlooks reflect AM Best’s concern over the deterioration of EmblemHealth’s balance sheet strength. The sizeable decline in capital over the past few years is the result of losses at its lead operating company, HIP, which has been under a capital restoration plan with the New York Department of Financial Services since 2016. That restoration plan calls for meeting and complying with a reduced reserve requirement. AM Best notes that while HIP’s capital and surplus exceeded the reduced reserve requirement at year-end 2019 and is expected to increase in 2020 due to earnings improvement and other initiatives being taken to improve HIP’s capital position, the improvement in capital has taken longer than AM Best’s expectations. AM Best will continue to monitor the organization’s strategy and results regarding improvement in earnings and the strengthening of capitalization. In addition, EmblemHealth has reported a trend of underwriting losses driven by higher medical costs amid intensifying market competition. Losses reported in 2019 were largely driven by deterioration in the group’s Medicaid and commercial lines of business.
The rating affirmations reflect various initiatives implemented by EmblemHealth to improve operating performance over the next several years, primarily driven by cost savings associated with completing its migration to a new operating platform, which has been outsourced to Cognizant. The group’s agreement with Cognizant is expected to improve EmblemHealth’s technology and operational capabilities. EmblemHealth has a solid market share in its core market. Through HIP and GHI, the organization maintains a sizeable market share in the greater New York City metropolitan area, which includes the City of New York account. EmblemHealth’s relationship with its affiliated medical practice, AdvantageCare Physicians provides a competitive advantage in delivering quality medical care to customers in all lines of business.
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