A.M. Best has assigned a Financial Strength Rating (FSR) of B+ (Good) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” to Memorial Hermann Health Plan, Inc., a subsidiary of Memorial Hermann Health System (Memorial Hermann). The outlook assigned to these Credit Ratings (ratings) is stable.

Additionally, A.M. Best has affirmed the FSR of B+ (Good) and the Long-Term ICR of “bbb-” of Memorial Hermann Health Insurance Company. The outlook of these ratings is stable. Collectively, the group is herein referred to as Memorial Hermann Insurance Operations. All companies are domiciled in Houston, Texas.

The rating assignments and affirmations reflect Memorial Hermann Insurance Operations’ strategic role as the managed care subsidiary of Memorial Hermann, a fully integrated health care delivery system. The ratings also consider Memorial Hermann’s established network and overall creditworthiness, which enhances each entity’s assessment. Further, the parent organization has demonstrated explicit financial support of the insurance operations through a quarterly capital contribution through third-quarter 2016. A.M. Best anticipates that Memorial Hermann will continue the capital infusions to support Memorial Hermann Insurance Operations’ strategic growth initiatives.

The Memorial Hermann Insurance Operations have been pressured by the competitive nature of the Houston-area commercial market, which drives significant underwriting losses on the existing and new business.

The losses were due primarily to poor experience in the individual market segment, mainly as a result of adverse selection by members. However, underwriting performance in its Medicare Advantage business also has trended downward, pressured by start-up costs and lower-than-expected risk scores. Concerns regarding capital pressure due to underwriting losses are somewhat mitigated by Memorial Hermann’s implicit and explicit support over the years. In addition, during 2016, management implemented several changes that targeted a shift in the business mix, increased operational efficiency, enhanced reporting capabilities and strengthened medical management; all of which may aid in a return to profitability and a steady premium growth trend at each regulated entity.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

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