A.M. Best Places Ratings of Colorado Choice Health Plans Under Review With Negative Implications

A.M. Best has placed under review with negative implications the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of Colorado Choice Health Plans (Colorado Choice) (Alamosa, CO).

The rating actions reflect a $2.1 million deterioration in Colorado Choice’s absolute capital for year-end 2013. This deterioration was driven by a $1.4 million net loss resulting from adverse claims experience combined with an approximate $700,000 increase in non-admitted assets related to software development associated with The Patient Protection and Affordable Care Act preparedness. Combined, these two items resulted in a decrease of approximately one-third of Colorado Choice’s capital. A.M. Best believes Colorado Choice currently maintains an inadequate level of risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), for its present insurance and investment risks, as well as any planned future growth.

A.M. Best believes near-term capital improvement is necessary following the significant impact of 2013 results. If capital does not improve in the near term, A.M. Best would likely take negative rating actions. The ratings will remain under review while A.M. Best continues discussions with Colorado Choice’s management regarding capital raising options currently being considered.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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