Assurant to exit health insurance market
Assurant plans to sell or shut down its health insurance and employee benefits business by 2016 and focus on housing and lifestyle insurance instead.
"The health and employee benefits business segments possess differentiated capabilities in their respective markets, but we do not believe they can meet our return targets at the pace we require," Assurant President and CEO Alan B. Colberg said in a statement. "While this is a difficult decision, we believe they would be strong assets for new owners that are focused more exclusively on healthcare and employee benefits."
Assurant Health expects to report a net operating loss between $80 million and $90 million in the first quarter of 2015, the company said. The firm will release full financial results May 5.
Half that loss can be attributed to a reduction in estimated recoveries from the Affordable Care Act's risk mitigation programs, the company said. FierceHealthPayer previously reported that insurers that rely heavily on risk corridor reimbursement could take an earnings hit. The insurer will not participate in open enrollment for the 2016 plan year, which begins Nov. 1.
Steven Schwartz, an analyst with Raymond James & Associates, told the Milwaukee Journal Sentinel that Assurant Health is "a casualty of the ACA," noting that the law's ban on turning away consumers with pre-existing conditions hit at Assurant's strength in risk underwriting. Assurant Health laid off 130 employees in 2010 and attributed the move to changes in the marketplace as a result of healthcare reform.
Assurant Health sold individual plans in 41 states and small-employer plans in 34 states, the Journal Sentinel said. The business brought in $2 billion in revenue but lost $64 million.
Barclays will advise Assurant in the potential sale of Assurant Health and Assurant Employee Benefits, the company said. Finding a buyer may be difficult, the Journal Sentinel said; because Assurant Health focuses on individual and small-business plans, it lacks the scale to negotiate directly with hospitals.