16 December 2019Insurance

Outlook for US health insurance stable – Moody’s

The 2020 outlook for the US health insurance sector will remain stable, reflecting the expectation of continued US economic growth and a sustained focus by insurers on controlling medical costs, Moody's Investors Service said in its annual outlook. However, political and legal risks are increasing and will remain elevated during 2020.

Moodys said the commercial health insurance market is mature with minimal enrolment growth expected. Short-term medical cost trends could modestly lower 2020 EBITDA growth.

Overall, the outlook is underscored by healthy earnings growth underpinned by steady economic and demographic trends, including strong growth in Medicare Advantage. Medical costs have been controlled by health insurers, but are expected to move modestly higher in 2020.

Other developments could impact the stable outlook for health insurers. This includes the ongoing legal challenge to the Affordable Care Act (ACA). If ruled unconstitutional, it would eliminate the individual market exchanges, subsidies and Medicaid expansion, which ultimately would be disruptive to the health insurance market and its players.

"Health insurance remains an important political issue, and among the proposals under discussion is a single-payer plan that would be an existential threat to the industry," Moody's vice president Dean Ungar said. "Other proposals, include a limited public option that would be open to participants in the individual market or a more expansive public option still would be credit negative, but likely manageable."

Moody's outlooks for 2020 consider fundamental credit conditions that will affect sectors for the next 12-18 months.

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