Assurant dishes on PPACA effects

Assurant Inc. (NYSE:AIZ) has been more open than some other insurers over the past year about its experiences in the major medical market.

Health insurance accounts for only about one-fifth of Assurant’s revenue, and the company is not a player in the Medicare or Medicaid markets. Assurant has no need to go out of its way to keep procurement officials at the Centers for Medicare & Medicaid Services (CMS) or state health program agencies happy.

This quarter, Assurant executives have pulled away from the industry pattern of painting PPACA World as a land of rainbows.

The company as a whole is reporting $50 million in net income for the fourth quarter of 2014 on $2.6 billion in revenue, compared with $109 million in net income on $2.4 billion in revenue for the fourth quarter of 2013.

The company’s health insurance unit posted a net operating loss of $37 million for the latest quarter on $503 million in net earned premiums, fees and other revenue, compared with $600,000 in net income on $417 million in revenue for the year-earlier quarter.

The company ended the quarter insuring 967,000 people, up from 907,000 people a year earlier.

The company stayed off the PPACA exchange system in 2014. For 2015, it’s been selling exchange qualified health plans (QHPs) in 16 states.

For a look at some of what Assurant executives said about the health insurance market during a conference call with securities analysts, read on.

1. The company has tried to deal with unexpectedly high 2014 claims by increasing 2015 rates about 20 percent, pruning benefits, and moderating sales by reducing sales commissions.

The health unit lost money even though it cut spending on expenses other than claims sharply, executives said.

Colberg said the biggest problem was last-minute moves the Obama administration made to let consumers hang on to “grandmothered policies,” or policies purchased between the time PPACA became law and Jan. 1, 2014.

Health insurers had priced 2014 major medical coverage based on the assumption that most people who had coverage purchased before major new PPACA commercial health insurance requirements took effect in 2014 would have to replace the coverage.

The decision to allow grandmothering “dramatically altered the risk pool in 2014 and made the market much sicker than expected,” Colberg said.