Blue Cross Blue Shield of North Dakota

The stable outlook reflects our expectation that the company will sustain its market leadership and 'AAA' capital redundancy for 2021-2023. We forecast adjusted EBIT ROR will normalize at 1%-2% in 2021-2022 with improved revenue due to the economic recovery, balanced by COVID-19 costs, and higher medical utilization. We could lower our rating by one or more notches in the next 24 months if our view of the company's competitiveness deteriorates because of weaker operating performance or significant loss of market share. We may also lower our ratings if the company's capital adequacy falls and stays below the 'AAA' confidence level. Although unlikely, we could raise our ratings by one notch in the next 24 months if BCBSND maintains its balance

...Blue Cross Blue Shield of North Dakota (BCBSND) has maintained its market position as the leading health insurer in North Dakota. BCBSND continues to be the leading health insurer in North Dakota, with a market share of about 50%, based on medical membership of 399,221 as of year-end 2020. The company's overall business strength, however, remains constrained by its small market size (population of 765,000 people) and "apply and approve" rate regulations that cap profitability. Moreover, BCBSND's overall business diversity is limited, though it plans to grow its government-sponsored business. The company entered Medicare Advantage (MA) in 2021 and bid for the state's managed Medicaid contract (which would start in 2022). Profitability could be strained in 2021 because of higher costs from the COVID-19 pandemic. Similar to the rest of the industry, BCBSND reported strong earnings for 2020 owing to a steep medical utilization drop concentrated in the second quarter of 2020. In 2020, BCBSND's...

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