The U.S. government shutdown is delaying reimbursements to health insurers that contract with the Department of Defense (DOD) to provide healthcare services under the TRICARE program, according to Fitch Ratings.
Fitch does not expect insurers will suffer material liquidity issues in the short term. If there is a protracted government shutdown, Fitch believes insurers that contract with DOD via TRICARE have ample liquidity from cash flows, unused lines of credit and invested assets to fund TRICARE claims. Earlier this week, the Defense Health Agency (DHA) notified some insurers that they cannot make disbursements during the government shutdown. The DHA authorized insurers including Health Net and Humana to continue to administer the contract for approximately two weeks to ensure continuity of operations. During this period, the DHA will not be making payments and, consequently, insurers such as Health Net and Humana will be paying claims.
Health Net and Humana revealed in Form 8-K disclosures that they expect to receive claims of $106 million and $175 million, respectively, during this two-week period. Ultimately, this is a timing issue, since the government will reimburse insurers.
Specifically, Health Net has $1.9 billion in total invested assets including $280 million in cash and equivalents. Furthermore, the company had $416 million available under its revolving line of credit as of June 30, 2013. Humana has $9.1 billion in total invested assets including $1.5 billion in cash and equivalents. The company had $995 million available under its revolving line of credit as of June 30, 2013.
Source: Reuters
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