OREANDA-NEWS. Fitch Ratings has published a special report providing a credit overview of Blue Cross and Blue Shield (BCBS) licensed health insurance and managed care companies.

This report, which is updated and published annually by Fitch, discusses the BCBS companies' common credit strengths and weaknesses, key credit challenges, and historical formation and growth. The report also includes a comparison of company-specific size/scale characteristics and quantitative credit factors as they relate to Fitch's rating category guidelines.
Fitch anticipates that the BCBS companies will report solid increases in enrollment and revenues for full year 2014, but significantly lower earnings largely reflecting Affordable Care Act-related increases in enrollment and revenues that were more than offset by increases in expenses.

Key challenges facing the BCBS companies in 2015 include potential pitfalls related to the U.S. Supreme Court's anticipated decision regarding the legality of consumer subsidies, a decision that Fitch believes could affect the BCBS companies more significantly than many of its peers. Another key challenge is the BCBS companies' on-going need to manage their pension plan obligations given the potential for reductions in discount rates used to project pension plan liabilities at year-end 2014.

BCBS companies' common credit strengths cited in the report include strong provider networks that contribute to large market shares in chosen markets, robust capitalization metrics, modest liquidity needs, and consistently strong reserves as measured by development of the number of days in claims payable ratio.

Common credit weaknesses include enrollment concentrations in a single or limited number of states resulting in heightened exposure to local competitive, economic, and political conditions. Additionally, rates of return on revenue and on capital are often lower and capital exposure to equity investment volatility is often comparatively high.