Insurance holding company – Assurant Inc. – announced their intent to exit the health insurance marketplace by 2016; and have retained investment banking firm – Barclays Capital – to locate a potential buyer for their health insurance and employee benefits subsidiaries. Like the legions of health insurers that have exited the market before and after passage of the Affordable Care Act (ACA), the reason is simple – quarterly losses in the millions with seemingly no end in sight. In the case of Assurant Health (and its more recognizable subsidiary insurers in the health insurance market including Time, John Alden Life, and Union Security Life) it appears the ACA was the proverbial “straw that broker the camel’s back”. Here’s what we know based on a variety of media outlets, and Assurant’s own press release…
a reduction in anticipated reinsurance recoveries from the ACA’s risk management programs;
* plan offerings attracted sicker than average people;
* higher than anticipated claims from ACA compliant policies sold both on and off public exchanges; and
* the various ACA delays that disrupted the marketplace by allowing some policyholders to maintain non-ACA compliant plans, while moving others to full compliance.
NOTE: Assurant Health provided insurance options through public health insurance exchanges in 16 states including Nebraska, during the 2015 open enrollment season. And at the close of 2014, Assurant insured 8,436 Nebraskans through both individual and group health insurance policy types; and thousands more at any given time through their temporary/short term major medical policy type, which provides gap protection for a specified period of time.
Adding to Assurant’s challenges was their inability to compete “toe to toe” with the much larger insurers having their own Preferred Provider Organization (PPO) networks, such as United Healthcare, Aetna, Cigna, and the various Blues plans. Such networks are able to negotiate lower health care pricing on behalf of their customers, which directly impact premium rate setting and risk management. And one need look no further than Assurant’s reported 2014 medical loss ratio of a whopping 104.3% to see the overall effect of the ACA and relatively higher claims costs. In other words, for every $1.00 of premium revenue Assurant collected, it paid out $1.043 in claims. In 2012 Assurant inked a deal with Aetna to offer its network to Assurant’s nearly 1 million policyholders, but it appears to be a case of too little, too late.