On April 28th, Assurant Health issued a statement that they will be either selling the company or shutting down. This comes as no surprise to us. Assurant Health has been a smaller health insurance company in the Indiana market.
Prior to the Affordable Care Act(ACA), they were really active in rural communities. They had creative small group products which did control premiums. They were the first insurance company to offer a 50% co insurance plan. At the time, those creative features created some savings for Hoosiers.
Post Affordable Care Act
In 2013, Assurant had gone through restructuring. Which may have been indications the company was already struggling prior to the ACA going live.
Assurant developed an Individual portfolio of products for off the exchange in 2014. This portfolio of Individual plans, looked like pre ACA plans designs, which included underwriting. At this time, only Humana and Assurant had true PPO networks for Indiana. This gave them a lot of new membership. The membership they were receiving was from the Hoosiers that wanted and could afford a PPO health plan. The reason these members wanted that coverage is because they were high claimants. Essentially, Assurant created adverse selection because of the plan design.
Anyone that was not utilizing benefits, choose a lower premium plan on or off the exchange. Northern Indiana had a huge amount of Assurant membership, because the plan gave them access to the Chicago health care system. They elected Assurant because they knew they had surgeries in the near future.
In 2015, Assurant led the insurance community in Indiana with the biggest premium rate increase in the state. This was in the ballpark of 30%. They had no choice because for every dollar they brought in on premium, they were losing .11. This created more adverse selection. Any healthy members, immediately looked for lower premiums, except those that were incurring claims. One thing about Assurant is they do pay claims, at least at that time.
Assurant then made a strategic move to enter the Federal Faceilted Market (FFM) place. After losing $90 million in 2014, this was a huge gamble. I call it a gamble because they had not addressed the real reason they were losing money. I don’t know how many states were in for the FFM but one of those states was Florida. Florida has always been a high risk state for health insurance companies. Now they are the only true PPO in Florida, and they have the highest premium. Who is going to elect that coverage?
Back to Indiana,
Assurant entered the FFM and now their plans are eligible for tax credits. They enter the Indiana market with the assumption they are the only carrier that will have true network access. Then UnitedHealthcare (UHC) also enters the exchange market with almost the same network access and their premiums are 20% lower. UHC then picks up the exchange members that would have gone with Assurant, for the exception of one area, Northern Indiana.
For some reason, Assurant’s rates actually went down in Northern Indiana, when the rest of the state was hit with 30%. This is an interesting decision by Assurant because these were the members that were crossing into Chicago for health care. Illinois healthcare cost are more than Indiana’s.
Why was Assurant not successful in the ACA market?
- Plan design
Assurant was offering Pre ACA plan in Post ACA market. Without underwriting there was no way for Assurant to control risk.
- Network PPO
Assurant contracted with the Aetna Signature Network. Assurant is one of the few carriers that was renting a network. Other carriers had developed their own networks. This created additional cost for Assurant. The PPO network also gave no control to Assurant to try to control cost by reducing reimbursement rates to medical providers.
- Prescription drug coverage
Assurant had the biggest drug list which is great for members but does not promote members to look at generic alternatives.
We were one of Assurant’s top producers for Indiana in 2014. We knew right away that they were attracting the members with the highest claims potential. We tried to address this issue with Assurant’s leadership. Assurant believed that they had to offer the very best option to their members, which attracted members with highest claims potential.
It is a huge loss to Indiana to lose any more insurance companies. Come 2016, Assurant will either be sold or shut down. Most likely shut down, because what company would want to take $90 million a year in losses.
The ACA, has changed health care and health insurance dramatically. No longer can a carrier offer the best health insurance option without risking/guaranteeing incurring huge losses.
Assurant did not adapt to the new ACA environment and they may be the 1st of many to drop out.