Assurant Healths parent company Assurant Inc. said June 10 it will exit the health insurance market and sell some small group business lines to insurance holding company National General Holdings Corp., a move the company says will allow a smooth transition for its policyholders while freeing up resources for future goals.
In April, the company announced it would either sell or shut down its health insurance business by 2016, following projected 2015 first quarter losses for its health segment of between $80 million and $90 million.
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Assurant Inc. has concluded a comprehensive review of strategic alternatives for its health business and will exit the health insurance market as the company sharpens its focus on housing and lifestyle specialty protection offerings, the parent company said in a statement Wednesday.
After a thorough review of alternatives for our health business, we believe the actions announced today allow us to uphold our commitments to policyholders while freeing up resources in 2016 to support our capital management strategy, says Assurant President and CEO Alan B. Colberg. We remain strongly committed to ensuring a smooth and orderly transition for our customers, agents and employees.
Assurant Health will cease sales of its individual major medical, small group fully insured and short-term medical health insurance policies on June 15 and will not participate in open enrollment under the Affordable Care Act for 2016.
National General will acquire Assurant Healths supplemental and small group self-funded product lines and other assets including a proprietary small-group sales channel. Assurant Health will continue sales of its supplemental and small group self-funded products as it finalizes the terms of the transaction with National General Holdings Corp.
Also on June 10, Assurant Inc. said its Milwaukee-based Assurant Health will cut about 300 employees of approximately 1,700 positions in Milwaukee and other locations.
ACA losses?
Approximately half Assurants projected 2015 losses are attributable to a reduction in 2014 estimated recoveries from the ACA risk mitigation programs, the company says. The remainder reflects elevated claims on 2015 ACA policies.
With a focus on individuals and small employers, Assurant Health was hit hard by changes made by the ACA, particularly the requirement carriers offer coverage regardless of pre-existing conditions and the requirements that health plans cover a package of essential benefits and spend at least 80% of every premium dollar on medical care or quality initiatives.
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In 2013, the business laid off more than 100 employees, a cut then-president and CEO Robert Pollock attributed directly to the elimination of underwriting for major medical policies effective in January 2014, as required under the Affordable Care Act.
Joel Rutledge, a benefits specialist at Allstate Insurance in Wichita, Kans., told EBA in April Assurant Health's recent financial woes cannot be pinned to the ACA alone, however.
"The real problem is they haven't been competitively priced for several years. Their product is nichey, too narrow of a target client, and outside that narrow spread they aren't priced where they can compete," he says.
"And they refuse to change from their pre-ACA model where they only were competitive in high-deductible situations. I had hopes for their new self-funded plans, but their underwriting department killed any chances of them making gains there, either. Too conservative, and they choked," he says.
Commission cuts
Earlier this year the health insurance carrier said it would no longer pay commissions on new business in certain markets of the United States, a move the carrier called a sales approach, but some benefit advisers felt was a slight.
The insurer cut commissions on new business in Florida, Nevada, Georgia, Indiana, Michigan, Pennsylvania and Texas. A spokesperson for the insurer said at the time that the changes would impact individual major medical products, but not the supplemental, short-term medical or small group products Assurant Health offers.
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