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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

AM Best Places Credit Ratings of PacificSource Health Plans Under Review with Negative Implications

AM Best has placed under review with negative implications the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of PacificSource Health Plans (PacificSource HP) (Springfield, OR).

The Credit Ratings (ratings) of PacificSource HP were placed under review with negative implications following the continued pressure on its government programs line of business, especially its Medicaid segment, as well as volatility in its earnings, capitalization and balance sheet metrics across its owned insurance entities. The under review status also considers potential pressure on its business profile and the rating enhancement it receives from its parent organizations, Pacific Health Associates (PHA) and Legacy Health.

The risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is assessed as very weak and the overall balance sheet strength of PacificSource HP is assessed as weak. The company manages capital to the minimum state regulatory requirements. Capital and surplus saw a decrease through year end, significantly impacted by a total premium deficiency reserve (PDR) of almost $75 million booked for 2025, consisting of a $44 million PDR for Medicare Advantage and a $30 million PDR for Medicaid, along with worsened results in the third and fourth quarters of 2024, largely related to increased Medicaid utilization. The reported year-end 2024 losses and capital levels were below projections provided at year end when AM Best’s last ratings assessment was completed (see AM Best Downgrades Credit Ratings of PacificSource Health Group Subsidiary). Additional PDR changes are expected and could cause additional volatility throughout 2025.

The projected 2025 results are still unfavorable; however, AM Best notes that there has been a capital contribution from its holding company, PacificSource, of $15 million, which was made during first-quarter 2025, and additional capital bolstering and operating performance initiatives are in progress as management believes are needed. Furthermore, capital contributions from PacificSource are planned for the remainder of 2025. AM Best will continue to monitor the appropriateness and adequacy of these initiatives to meet BCAR requirements and also in relation to operating performance and required reserve adjustments, over the next one to two quarters of 2025 at a minimum.

The amount of rating enhancement afforded through lift from one of its two 50% owners, Legacy Health, could also be impacted, as well, as Legacy Health has no immediate plans to provide explicit capital support to its insurance subsidiaries to support their recent losses and capital declines.

The ratings will remain under review with negative implications while AM Best monitors the organization’s financial condition and discusses corrective action plans for bolstering risk-adjusted capitalization and operating performance in the near-to-intermediate timeframe. Additional losses or lack of improvement through organic means and/or potential additional capital support from either or both parents could result in further negative rating actions.

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.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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