Health Insurance Downgrade? It’s FALSE NEWS!

An insurance company downgrade is such a serious act that it can, and does, alter the entire financial health of a company. It can easily send it into a downward tailspin. That’s why the recent news of the downgrade of the entire insurance industry was especially shocking and worrisome. When Moody’s, a leader in the analysis of capital markets, makes a credit rating, as the saying goes, people listen. And in the case of the right wing scream machine, they make sure everyone in America listens too. Unfortunately, they too often get it wrong, as Fox News, The Hill and others did in the case of the non-existent downgrade.

But as is typical with the anti-Obamacare headlines, the story is a bit more complicated than that. Most importantly, according to Carrie Sheffield, formerly an analyst at Moody’s, “Moody’s has a very specific vocabulary for what it means to ‘downgrade’ or ‘upgrade’ something.” To the point, they upgrade and downgrade companies, bonds and credit ratings. They do not upgrade or downgrade industries. And in this instance, despite The Hill’s headlines, there was no downgrading of any insurers in connection with the Moody’s report.

What the report does say is that Moody’s believes there are issues that change the outlook for health insurers, a change that can put creditors at risk. Specifically, they say that they expect “reduced net earnings margins of approximately 2% in 2014, compared to an average of 3% the previous year”. The report also cites enrollment numbers, regulation changes, Medicare Advantage premium reductions, and unemployment that reduces enrollment in commercial insurance companies...