AM Best Revises Issuer Credit Rating Outlook to Positive for Priority Health and Priority Health Choice, Inc.; Withdraws Credit Ratings of Priority Health Choice, Inc.

(Oldwick, N.J. - Aug. 13, 2019) AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a” of Priority Health and its subsidiary, Priority Health Choice, Inc. The outlook of the FSR remains stable. Both companies are domiciled in Grand Rapids, MI. These companies are collectively referred to as Priority Health. Concurrently, AM Best has withdrawn the ratings of Priority Health Choice, Inc. as the company has requested to no longer participate in AM Best’s interactive rating process.

The Credit Ratings (ratings) reflect Priority Health’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The revision of the Long-Term ICR outlook to positive reflects Priority Health’s strengthening of risk-adjusted capital and balance sheet strength assessment. Priority Health’s balance sheet strength assessment is underpinned by risk-adjusted capital that AM Best expects to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Overall, positive net income has continued to contribute to a solid level of organic capital growth through retained earnings.

Priority Health is majority owned by Spectrum Health System (Spectrum), a financially strong integrated health care system within which Priority Health is a key component. AM Best considers Priority Health’s integration with Spectrum as beneficial, having a positive impact on overall operating results through brand recognition, contracting, medical management, as well as administrative savings for shared services. Additionally, Priority Health makes a sizeable contribution to consolidated revenues and earnings for the organization.

Priority Health has a reported a trend of favorable operating performance. In particular, Priority Health’s underwriting performance improved after declining in 2016, driven by the commercial segment. The company has revised its underwriting strategy, which has kept its operating margin at a favorable level while still allowing the group to maintain meaningful market share in its core service areas.

Offsetting rating factors includes a shift in business mix to government-funded business segments and the anticipation of some margin compression in the near term. Priority Health revenues and earnings could be exposed to funding and reimbursement rate pressure, which can be experienced in federal and state government programs.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

About Priority Health:

With over 30 years in business, Priority Health is the second largest health plan in Michigan, offering a broad portfolio of health benefits options for employer groups and individuals, including Medicare and Medicaid plans. Serving more than a million members each year, and offering a network that includes 97 percent of primary care physicians in Michigan, Priority Health continues to be recognized as a leader for quality, customer service, transparency and product innovation. Priority Health is the smart choice for people seeking affordable, quality health insurance.