A.M. Best Special Report: Companies Pressured by Higher Claims, Expense and Debt Ratios

Managed care companies' earnings fell year over year by 27.5% in the first six months of 2008 and should remain under pressure over the near term. Earnings have been impacted by factors ranging from increases in the number of higher dollar claims and claims severity to rising outpatient utilization and a severe flu season. As a result, higher loss ratios and administrative expenses have cut into margins. In September, A.M. Best Co. revised its outlook to negative for the health industry, partly due to the potential for investment write-downs, higher financial leverage and the impact of an economic downturn on commercial enrollment.

-- The medical loss ratio rose 180...

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