Assurant to Shutter or Sell Health Insurance Operations

Milwaukee-based Assurant Health, a unit of New York-based Assurant, Inc., said April 28 that it was getting out of the health insurance and employee benefits businesses after posting a net operating loss of more than $80 million in the first quarter of 2015. Early this year, the company noted that it had lost tens of millions of dollars in 2014 due to a large number of members covered by non-exchange-based transitional health plans that don’t comply with the essential health benefits called for by the Affordable Care Act. Those members, the company said, were far sicker than expected. The company had initially said it would need to boost premiums for the 2016 plan year. In March 2014, HHS said that health plan operators could continue renewing non-ACA-compliant transitional plans until October 2016.

In a May 6 conference call to discuss first-quarter earnings, company executives detailed “worse than expected” results from the Assurant Health unit, which it intends to sell, along with its employee benefits subsidiary.

The parent company, which is strongest in the home and life insurance segments, had said that the long-term prospects for the health insurance unit were not sufficient to continue operations. During a conference call to discuss first-quarter earnings results, Christopher Pagano, Assurant’s chief financial officer, said the net operating loss for Assurant Health was $84 million for the first quarter of 2015.

“Approximately half was due to a reduction in our estimated recoveries under the ACA [Affordable Care Act] risk-mitigation programs for 2014 policies,” he said. Assurant said ACA policies now make up 60% of the health insurer’s premiums compared to 18% last year. Pagano said absent a sale of Assurant Health, “we will begin the process to exit the market and will not participate in the 2016 ACA open enrollment.” On the same call, Assurant CEO Alan Colberg said the sale of the health and employee benefits units would be separate and not a package deal.

For the 2015 plan year, Assurant offered ACA-compliant coverage outside of exchanges in 40 states and through HealthCare.gov in 16 states: Arizona, Florida, Georgia, Illinois, Indiana, Michigan, Montana, Nebraska, Nevada, New Hampshire, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee and Texas. A spokesperson for Assurant declined to provide 2015 enrollment data.

Excerpted from the 5/1/2015 issue of AIS’s Inside Health Insurance Exchanges