AM Best Downgrades Credit Ratings of Health Alliance Medical Plans, Inc. and Health Alliance-Midwest, Inc.

AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating to “bbb” (Good) from “a-” (Excellent) of Health Alliance Medical Plans, Inc. and its wholly owned subsidiary, Health Alliance-Midwest, Inc. The outlook of these Credit Ratings (ratings) has been revised to negative from stable. Both companies are domiciled in Champaign, IL, and collectively are referred to as Health Alliance.

The ratings reflect Health Alliance’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). In addition, the ratings consider the financial and operational support provided to the organization by its ultimate parent, The Carle Foundation, as Health Alliance plays an integral role within The Carle Foundation’s integrated health care delivery system.

The rating downgrades are attributed to a deterioration in Health Alliance’s absolute and risk-adjusted capital. Health Alliance’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), declined to an assessment level of weak from strong at year-end 2022. This deterioration in capital was driven by a sizable net loss, as well as a material unrealized capital loss due to the downturn in the investment markets, a large increase to non-admitted assets and a dividend payment to the parent organization, which was partially offset by a small capital contribution.

Health Alliance reported growing underwriting and net losses in 2022, driven by a strong resurgence in utilization and higher-than-anticipated COVID-related costs. Operating losses are expected to continue for 2023, although projected to be lower, as the company takes initiatives to improve profitability. AM Best does note that Health Alliance historically had reported a trend of favorable earnings.

The negative outlooks reflect AM Best’s concerns that the improvement in risk-adjusted capitalization and turnaround in operating performance may take longer than anticipated. AM Best will monitor the status of the organization’s risk-adjusted capital, balance sheet position and operating performance as the company implements corrective measures.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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