Moody’s: Jury’s Still Out on Value of Big Insurer Deals

Although health insurance companies in the past decade have significantly grown and diversified — thus strengthening their businesses — their credit ratings haven’t benefitted very much, at least according to one prominent rating firm. The reason, according to Dean Ungar of Moody’s Investors Service, is that insurers have taken on more debt in order to finance their acquisition sprees, and it’s not yet certain whether those moves will pay off.

Ultimately, “we think if the leverage can kind of stabilize and maybe come down a little bit, you [will] see a stronger business profile in terms of capabilities, scale and scope,” Ungar tells AIS Health, a division of MMIT.

In a report published earlier this month, Ungar and other Moody’s analysts argue that the health insurance industry has come a long way since 2010. The shift from fee-for-service to a value-based care model is ongoing, insurers are paying more attention to social determinants of health, and the changing business environment “has driven a significant amount of consolidation and vertical integration among our rated companies,” according to the report.

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Leslie Small

Leslie Small

Leslie has been working in journalism since 2009 and reporting on the health care industry since 2014. She has covered the many ups and downs of the Affordable Care Act exchanges, the failed health insurer mega-mergers, and hundreds of other storylines spanning subjects such as Medicaid managed care, Medicare Advantage, employer-sponsored insurance, and prescription drug coverage. As the managing editor of Health Plan Weekly and Radar on Drug Benefits, she writes and edits for both publications while overseeing a small team of reporters who also focus on the managed care sector. Before joining AIS Health, she was a senior editor for the e-newsletter Fierce Health Payer, and she started her career as a copy editor at multiple local newspapers. She graduated with a dual degree in journalism and political science from Penn State University.

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