California’s Proposed Medicaid Cuts Could Hit Insurers

California is seeking deep cuts in Medicaid, a move that could ripple out to other states and affect some insurers. The state is seeking federal approval for new Medicaid restrictions, including possible limits on the number of times they can see a doctor, the Los Angeles Times reports.

That move could affect insurers. Standard & Poor’s equity analyst Philip Seligman downgraded HealthNet (HNT) to Strong Sell from Hold today on concerns that the company could face cuts to its Medicaid business in California.

“HealthNet’s Medicaid members account for about 43% of its California enrollment (one-third of its total Western Region enrollment),” Seligman writes. “With one peer noting the state’s plan to lower Medicaid reimbursement, and our view that medical cost trends will rise, as experienced by another peer and higher Medicaid admits reported by a hospital group, we see risk of pressure on margins.”