Moody’s shifts HCSC view to negative

Moody's Investors Service said it revised its outlook for Health Care Service Corp. to negative from stable and affirmed the A3 ratings.

HSCS is buying the Medicare businesses and CareAllies of the Cigna Group for $3.3 billion in cash, to be funded in part by a debt issuance later this year.

“The negative outlook reflects our view that HCSC will face challenges as it integrates the Medicare Advantage (MA) business into the company's primarily commercial insurance operations. HCSC's current MA membership is small, and while this transaction gives them increasing scale in MA, it will still leave HCSC behind the major health insurers in MA market share,” Moody’s said in a press release.

The company plans to invest $1 billion over the next two years to update systems and for working capital, but this may not be enough, Moody’s warned.

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