Economic slowdown could hit insurers, Moody’s says

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A slowing economy and high inflation could create headwinds for insurers, Moody’s Investors Service said in an August report.

Moody’s analysts in a report outlining upcoming challenges for the healthcare industry said an economic slowdown could lead to job losses and a decline in commercial registrations, which could depress key earnings drivers for insurers. says there is

US Gross Domestic Product, a comprehensive measure of economic activity, contracted again in the second quarter, raising fears of a recession.

However, Moody’s notes that the impact of a slowing economy and continued inflation is likely to have a small impact on insurers. That’s because, unlike hospitals, insurance companies are less exposed to supply chain problems, rising interest rates and labor shortages, Moody’s said.

At the beginning of the pandemic, insurers saw a 2.7 million loss in commercial subscribers amid layoffs and job cuts. But the government-sponsored program Medicaid offset these losses by targeting an additional 5 million people, Moody’s said.

Government programs are now bigger than they were during the 2008 recession.

Moreover, according to the rating agency, many insurers have diversified revenue streams and have more than insurance assets compared to 2008, helping to offset declines in enrollment.

But the threat of layoffs may prompt those with commercial insurance to take out health insurance before they lose their jobs and insurance altogether. A similar trend was recorded in 2008, according to Moody’s.

Another headwind for insurers could be years of continued inflation. This may lead providers to demand higher reimbursements, resulting in higher premiums for members. This will put continued pressure on insurers’ commercial enrollment.

“In this scenario, commercial insurance premium growth could exceed inflation. It’s possible,” said Moody’s report.

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