Blue Cross Blue Shield plans dominated the Affordable Care Act insurance exchanges, according to recent ratings from Standard & Poor.
The 2014 exchanges "might as well be called 'Blue Exchanges,'" S&P analyst Deep Banerjee wrote, reported LifeHealthPRO.
The Blues' S&P ratings matter to insurance producers for many reasons. For starters, the ratings determine whether or not insurers can get capital from investors. This then will determine how much insurers must pay for said capital. Ultimately, this affects how much members trust their insurers to handle claims, noted the article.
If Blues' ratings were based strictly on capital, more than 70 percent of the Blues S&P rates would have enough capital to qualify for a AAA-level rating, the analysts found.
S&P found that, while Blues do have strong finances, their return on revenue decreased dramatically over the course of a year.
For instance, the S&P-rated Blues' median pretax return on revenue was 2.6 percent, with the actual returns at individual companies ranging from a loss of 2.5 percent to a gain of 7.8 percent.
While S&P noted Blues' dominate presence on exchanges, Blues will have to defend their margins down the road. "Some of the Blues had priced aggressively on the exchanges to maintain their strong positions in the individually insured marketplace," noted the analysts. "Although the strategy worked when it came to membership gain, it may have come at the cost of weakened underwriting performance."
The S&P analysis is on par with other industry predictions. Because Blues plans have a reputation for affordability, it's possible their long run of success is, in fact, limiting their ability to progress in the industry, FierceHealthPayer previously reported.