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Money-losing Assurant Health to close as owner faces steep losses, fines

The company previously estimated that the exit would cost between $175 million to $250 million over the next 18 months.

<em>Image from Google</em>Image from Google

Assurant, one of the most profitable home and life insurers, is advancing its plans to leave the health insurance business and sell off a subsidiary in an attempt to cut its losses on the sector.

Assurant Health, a division of New York-based Assurant, recently said lost $124 million despite having $2 billion in revenue in the second quarter of 2015.

Assurant announced this past spring that it would leave the health insurance market by the end of 2016 and try to sell its Milwaukee-based health insurance subsidiary along with its voluntary benefits unit.

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The company previously estimated that the exit would cost between $175 million to $250 million over the next 18 months. The run-off operations that brought a $124 million loss last quarter include $107 million in "exit-related charges," mostly in "premium deficiency reserves, asset impairments and severance."

Assurant Health is slated to close, but prospects are good for selling Assurant Employee Benefits, said Assurant president and CEO Alan Colberg.

"We made progress with respect to the sale of Assurant Employee Benefits," he said in a conference call. "Market interest continues to confirm our view that Employee Benefits is a valuable company." Assurant also recently agreed to sell its supplemental and self-funded policy business line to National General. 

[Also: HHS: Tax incentive hits $268 per month for Healthcare.gov enrollees]

Throughout the 1990s and 2000s, Assurant Health was a major and profitable player in individual and small group markets across the country, relying on "world-class risk management around underwriting," said then-CEO Robert Pollack, a 33-year Assurant veteran, in 2010.

The Affordable Care Act banned or restricted many of those risk management practices, which around the same time as health reform led to a series of high-profile lawsuits.

In 2010, Assurant paid $37 million in damages after a Colorado jury concluded that a former customer injured in car accident was wrongly denied payment of her healthcare bills, based on an allegedly undisclosed a pre-existing condition. That same year Assurant paid $10 million to a South Carolina customer whose coverage was cancelled when he tested positive for HIV, a lawsuit that revealed a computer algorithm Assurant used to find members with HIV and look for reasons to terminate coverage.

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The new ACA reforms -- essential health benefits, medical benefit ratios, no annual coverage limits, guaranteed-issue banning pre-existing conditions, and age-rating restrictions -- forced Assurant to overhaul its health business and downsize before trying to achieve scale in the new market. In 2013, Assurant Health had to pay customers about $30.8 million in rebates for not spending enough of their premium revenue on actual services -- more than any other insurer.

Using Aetna's national provider network, Assurant sold exchange plans in 16 states, including Arizona, Indiana, New Hampshire, Pennsylvania, Florida, Michigan and Texas, along with non-exchange plans in 41 states. The company struggled to make the financing work and saw soaring medical claims and fewer-than-expected recoveries from the ACA's risk mitigation programs.

Assurant Health has had to deal with new complaints of aggressive practices. In Montana, Assurant was accused by regulators of charging residents different prices for the same health insurance policies, with discounts for healthier individuals. "Charging higher prices to sick people for the same health insurance policy is discrimination," said Montana Insurance Commissioner Monica J. Lindeen.

To settle the charges, Assurant agreed to pay a $25,000 fine to the state and refund $1.7 million to about 1,600 Montana policyholders who paid more for their policies than healthier people.

Twitter: @AnthonyBrino