AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Blue Cross and Blue Shield of Vermont and Its Subsidiary

AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating (FSR) of C++ (Marginal) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “b+” (Marginal) of Blue Cross and Blue Shield of Vermont (BCBSVT) and its subsidiary, The Vermont Health Plan, LLC, collectively known as Blue Cross and Blue Shield of VT Group (BCBSVT Group). The outlook assigned to the FSR is stable, while the outlook assigned to the Long-Term ICRs is negative.

The Credit Ratings (ratings) reflect BCBSVT Group’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management.

The negative outlook assigned to the Long-Term ICRs reflects AM Best’s concern regarding the continued pressure on BCBSVT Group’s balance sheet strength driven by very weak risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and deteriorating balance sheet strength metrics due to sizable operating losses through 2024.

BCBSVT Group’s balance sheet strength remains challenged due to the group’s level of capital, both absolute and risk-adjusted, which has declined over the past few years. BCBSVT’s capital and surplus was supported in late 2024 with a surplus note issued by Blue Cross Blue Shield of Michigan Mutual Insurance Company, an affiliated company. Even with the surplus note, the company remains under a capital restoration plan by Vermont’s Department of Financial Regulation. As a result of the surplus note, the overall quality of capital has declined, as over 50% of capital is in the form of a surplus note. Additionally, liquidity metrics have had a declining trend from 2020 to 2024, driven by poor underwriting performance.

BCBSVT Group has reported underwriting losses in four out of the past five years driven by higher utilization, as well as medical and pharmacy costs, which have been higher than expected. All insured segments were impacted negatively by higher medical and pharmacy claim trends in 2024. The company is focused on improving underwriting profitability via rate increases and other initiatives that should lead ultimately to an increase in its capital position.

The limited business profile reflects the challenging regulatory environment in Vermont, with the Department of Financial Regulation overseeing regulatory capital while the Vermont Green Mountain Care Board has oversight on rate increases. The objectives of the two regulatory authorities have a history of not being aligned, which historically has hindered BCBSVT Group’s ability to obtain requested rate increases. BCBSVT Group maintains a large market share in Vermont, where a large majority of businesses are small in scale, and maintains a large presence in the Affordable Care Act marketplace. However, the group faces limited competition in these markets due to few companies participating.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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