A.M. Best Downgrades Rating of Christiana Care Health Plans; Maintains Under Review Status.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 21, 2003 A.M. Best Co. has downgraded the financial strength rating to C+ (Marginal) from B+ (Very Good) of Christiana Care Health Plans, Inc. (New Castle, DE). The rating remains under review with negative implications. This rating action reflects significant net loss from Christiana Care's dominant business line, Medicaid, and the substantial decline in statutory capital and surplus by the third quarter of 2003. Partially offsetting this adverse development is a commitment on the part of the company's parent, Christiana Care Corporation (CCC CCC A very speculative grade assigned to a debt obligation by a rating agency. Such a rating indicates default or considerable doubt that interest will be paid or principal repaid. Also called Caa. ), for support until June 2004 and the strategic role Christiana Care plays as the managed care affiliate of the not-for-profit integrated health care integrated health care, n healthcare services combining the best of conventional and complementary health care. delivery system. The under review negative rating status reflects A.M. Best's ongoing assessment of Christiana Care's proposed actions to mitigate future losses, obtain future rate increases from the state and concessions from providers and prevent further erosion of surplus. Slightly longer-term concerns relate to Christiana's ability to profitably continue the Medicaid business after June 2004 and CCC's desire to continue support after June 2004, given the losses originating from the company's dominant business line. Future downgrades may follow as A.M. Best monitors developments of actions being taken by Christiana Care. In the third quarter of 2003, Christiana Care reported an underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. loss of $42.0 million and a net loss of $40.3 million. These losses are attributable to the mis-pricing of the state of Delaware Medicaid contract and include a premium deficiency reserve of $19.1 million for the fiscal year 2004 Medicaid contract, which ends June 30, 2004. As a result of the large net losses, Christiana Care's capital and surplus has been almost entirely depleted de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d . However, A.M. Best recognizes CCC's explicit commitment to maintain Christiana Care's capital and surplus at a positive level until June 2004. Additionally, there are uncertainties regarding the plan's ability to re-negotiate with providers, as well as the future of the Medicaid contract for 2004-2005. A.M. Best remains concerned about the magnitude of the large losses on a contract that represents over 80% of Christiana Care's membership. Furthermore, the low level of capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. at Christiana Care--even with a contribution from CCC--places added pressure on the rating. The rating continues to rely on CCC's stated support, should receivership receivership In law, state of being in the hands of a receiver, a person appointed by the court to administer, conserve, rehabilitate, or liquidate the assets of an insolvent corporation for the protection or relief of creditors. be impending im·pend intr.v. im·pend·ed, im·pend·ing, im·pends 1. To be about to occur: Her retirement is impending. 2. . CCC emphasizes comprehensive health services health services Managed care The benefits covered under a health contract , strong practitioner relations and a diversified diversified (di·verˑ·s provider network. Christiana Care is an intrinsic part of the corporate strategy and provides patients to the CCC health care system. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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