Insurance company Assurant Health lost tens of millions of dollars last year as policyholders who had non-exchange plans compliant with the Affordable Care Act turned out to be far sicker than expected. The insurer already is raising premiums to insulate itself against future losses.
“The loss for the year was disappointing and reflected persistently high ACA claims experience,” Assurant CEO Alan Colberg said in an earnings call Friday.
The company in January started instituting premium increases in the double digits, on average, and “closer to 20%,” Colberg said. Assurant Health also lowered commission levels for brokers in some areas to rein in costs. Premiums for the current open-enrollment period for exchange plans were set before these changes were instituted for other Assurant offerings.
Assurant Health, part of the larger Assurant Inc., said it lost $37 million in the fourth quarter of 2014 and $64 million in the calendar year. The insurer offers health coverage to individuals, families and small-group employers both on and off the ACA's public exchanges. The 2015 open-enrollment period, which started last November, was the first time Assurant Health started selling on the exchanges after selling off-exchange plans the prior year. It now sells exchange plans in 16 states.
The sizable losses were almost exclusively due to a White House policy shift, executives said. In November 2013, President Barack Obama said health insurers' 2014 policies did not have to meet ACA requirements.
In March 2014, the administration went a step further and said consumers could stay in non-ACA-compliant plans through 2016. Obama issued the extension after millions of Americans received health plan cancellation notices, a direct contradiction to the president's popular statement that “if you like your plan, you can keep your plan.”
However, health insurers and actuaries criticized the administration's about-face. They said the change could hurt the individual market's risk pool because fewer younger and healthier people would choose plans that met ACA standards.
That's what Assurant Health contends happened. Executives said their ACA business “had worse morbidity characteristics than we had assumed, and pricing of policies could not be modified.” Utilization of healthcare services in the individual market was also up significantly in the latter stages of 2014.
The blow to Assurant Health's bottom line could have been worse if not for the ACA's insurance risk programs. The company received almost $400 million in supplemental funding specifically through the risk adjustment and reinsurance provisions. Assurant Health did not record any risk-corridor funding last year because it had not yet participated on the exchanges.
Assurant Health's total premium revenue in 2014 was slightly less than $2 billion, up 23% from $1.6 billion in 2013. Despite Assurant Health's struggles, the parent company still recorded a $471 million profit in 2014. Revenue for it totaled $10.4 billion.
Follow Bob Herman on Twitter: @MHbherman
