A couple of valued commenters pointed out this article from Wisconsin regarding an insurer leaving the health insurance industry:
The parent company of Assurant Health said Tuesday that it will sell or shut down the Milwaukee health insurer — which employs 1,200 people in the area — by the end of next year.
Assurant Health has struggled to adjust to changes in the health insurance market imposed by the Affordable Care Act and is expected to report an operating loss of $80 million to $90 million in its first quarter. That comes after it lost $64 million last year….Assurant Health does not have the size in any one market to negotiate contracts directly with hospitals and doctors. It instead typically pays a monthly fee to other insurers to access their networks, potentially increasing its costs.
Assurant Health’s losses suggest that any buyer would have to raise the cost of its health plans next year. At the same time, the online marketplaces set up under the Affordable Care Act have made it easier for people to compare prices and move to different health plans each year.
This is not surprising. Assurant Health was a symptom of the extremely dysfunctional nature of the individual insurance market before PPACA. It was a vampire that drank blood in quarts and very rarely paid benefits as it specialized in very high deductible policies with significant coverage limitations and short term contracts. The old business model was based on churn, it was based on cherry picking, and it was based on very low medical expense ratios as Assurant would seldom pay out.
When I was between jobs as an idealistic, young college graduate, I had an Assurant Health policy for $41 a month. It had a $20,000 deductible, it did not cover prescriptions, it did not cover mental health, it did not cover maternity. It was hit by a bus insurance. As a twenty three year old, out of control buses were one of my primary health concerns. The policy was re-underwritten every six months. Thankfully I found a new job with benefits three months into the policy term. That type of coverage can no longer be sold to new members since PPACA passed. It fails the out of pocket maximum, it fails the minimum essential health benefits requirements, it fails the no cost sharing services, it fails community rating. It basically fails every new test that PPACA instituted to determine what constitutes “adequate insurance”.
Assurant had been trying to be a lean, low cost company with the ability to manage a national network but it failed. It attempted to go on the Exchanges last year, and it failed miserably. Below is a chart of four cities with the best Assurant Silver pricing compared to the 2nd lowest Silver plan on the market for a 40 year old non-smoker. These are non-subsidized, non-cost sharing assistance prices:
Assurant’s Silver product is not directly comparable in terms of features to the 2nd Silver in these markets. The 2nd Silvers are narrow or super narrow networks with PCP gatekeepers while Assurant is offering a broad national network without PCP gatekeepers. But we have seen that people are not valuing big broad networks all that much. And for those who do, they have plenty of options at lower prices from the Blues or the major national commercial carriers.
Assurant was offering a product that is overpriced and non-unique. It is not surprising that they were losing lots of money. Competition should drive out insurers who can’t offer reasonably priced products with good value. That is the entire point of managed competition — provide buyers with reasonably useful side by side comparisons to reduce information aysmetries, and then let the atomistic nature of the market determine what is to be offered and by whom. Assurant Health leaving the health insurance industry is a minor, predictable and net positive public policy win.
Emily68
Richard: I know this is off topic, but at least it’s about insurance. I live in Tea Party Country and our member of Congress votes to repeal the ACA. Is there some data somewhere so I could learn how many people in his district have insurance now compared to before the ACA and also how many get a subsidy or are enrolled in the expanded Medicare? He probably won’t care, but maybe a few of his constituents would.
Thanks.
cahuenga
Purely anecdotal, but… We live in San Luis Obispo, California, a smallish market. Insurance on the pre-ACA individual market was ridiculously expensive here as there was basically two choices for us, Anthem, and Blue Shield. The first year of the ACA was great, competition actually materialized here. however, we are now back to the same two choices here, and prices are rising again. Unless you are getting subsidies you would never know the difference between the old system and the new.
MomSense
But, but, but Obama said if you like your insurance you can keep it.
We had an outfit a bit like Assurant here in Maine that set up shop shortly after LePage and the Republicans pushed out the Insurance Superintendent and loosened insurance regulations. Anyway this company was great at accepting premiums but not so great at paying for services.
I keep bumping into the LePage loophole here. A woman yesterday was really upset that she doesn’t qualify for Medicaid but doesn’t earn enough to access the subsidies through the exchange. We are going to get together today and look on healthcare.gov
It is really frustrating for people and they can’t understand why they are in this situation and too many don’t know that it was the direct result of the governor and not part of the ObamaCare design.
Richard Mayhew
@MomSense: Remember that the income estimate is only an income estimate for Healthcare.gov, and good faith but optimistic estimates to get to 100.1% FPL are acceptable.
Dan Garfinkel
The Assurant name will begin popping up in GOP presidential candidate speeches in 3, 2, 1…as an example of the complete and utter failure of Obamacare. Mark my words. Up is down, war is peace, black is white, rinse and repeat.
MomSense
@Richard Mayhew:
Thanks. That is what I was planning to help her with today. Unfortunately it’s not widely known as a legitimate work around so she had a panicked day and night thinking she would have to go uninsured and she is a cancer survivor. Makes me think really not nice things about certain Justices of the SCOTUS and Republican governors.
japa21
You mention a major aspect of the Exchange products and how Assurant was almost guaranteed to fail.
The lower preiced plans tend to have narrower networks. Assurant never had its own network but instead participated by renting networks from companies. Those networks, due to their nature, tended to not have as good a payment structure (from the insurer’s point of view) and it cost money for Assurant to rent those networks, up to 10% of the savings off the billed charges.
An example comparing an Assurant payment vs say a Mayhew insurance payment.
A claim comes in from a provider for $100. Mayhew insurance is contracted with that doctor to receive $50 for that claim. The rental network is contracted with that doctor to pay $60. So Assurant pays the $60 (taking out co-pays for the moment) plus pays the rental network another $4, totaling $64. In other words, they are paying 28% more for the same claim. And this is, quite honestly, a optimistic view.
As you say, Assurant is a vampire, like many other similar companies and the ACA is a stake through its heart. My only sympathy goes to the workers, many paid a mere pittance, who will be losing their jobs.
Richard Mayhew
@japa21: And more importantly, most of the major networks that are available for rent have standard clauses in their contracts that they are first among equals… so if the renter creates a narrow network for a product that the rented network is wrapped into, the rental network has to be included at the preferred/highest/best tier of coverage so you can’t tier and steer with rental networks. Assurant probably could not build a narrow network contractually. That is pure speculation on my part, but highly probable speculation.
Fair Economist
Re San Luis Obispo:
Having a system that primarily relies on competition rather than direct government regulation to keep down prices creates yet one more advantage for major metropolitan areas, as towns and even smallish cities will necessarily have healthcare monopolies or oligopolies.
Florida Frog
My experience has been a bit different. Florida Blue’s premiums were ok in 2014 but went up by about $400/mo for a 60ish couple. We switched to Assurant to keep the premiums roughly level with 2014 rates. What happens to Assurant customers? Mr. Frog had surgery last week. Are we still covered?
Richard Mayhew
@Florida Frog: You’ll be covered for this year, and then you’ll need to enroll in a different insurer during this fall’s open enrollment for Jan. 1 coverage.
Richard Mayhew
@Fair Economist: Not 100% sure about that analysis on the insurer side … I’ll readily concede it on the provider side as a small town on the fringe of an MSA or in a non-MSA county will most likely have only one readily accessible hospital, a pair of PCP practices etc, but the insurance side the barrier to entering a new county within a state is fairly low IF the insurer can get providers to sign up…. damn it, I need to write a post on this :)
Villago Delenda Est
@MomSense: LePage is a sack of dogshit. What the fuck is wrong with these states (Florida, Wisconsin, Kansas, Maine, New Jersey, New York) who reelect sacks of dogshit to their governor’s mansions?
mai naem mobile
Guess the flea.market rules.didn’t work for a company in.Scott Walkers state.
JustRuss
Sure they sold crappy insurance, but they employed 1200 people who are now out of work. More proof that Obamacare is destroying our economy! /FoxNews
KithKanan
@cahuenga: I live here too, so I’m a little confused who the other individual market options were last year.
The only CoveredCA options I’ve ever seen for the area were Anthem and Blue Shield. Kaiser “serves” Region 12, but I think they only actually cover Ventura County out of the three in the region.
@Richard Mayhew: We’re not quite the small town you describe — around ~50K population including on-campus at the local college and the county seat and so largely regional medical center for a ~275K population mostly within a 30-minute drive.
There are two hospitals, dozens of PCP practices (mostly still solo or small group practices, but there’s been some consolidation with the electronic medical record requirements). That said, there are only two urgent-care facilities, and neither of them is open past 8pm.
One thing that is interesting is that HMO options in the area are significantly more expensive (near-double the cost the last time I looked) than PPO options, and not offered on CoveredCA. I’m assuming they only exist to cover employees from larger regional/national companies that expect to have at least one HMO on offer?
KithKanan
@KithKanan: Counting the north of Santa Barbara County, which is closer to us than to their own major population centers, we’re probably a population cluster of around 400K people. In some states, that would be respectable but in CA it often isn’t worth serving — not when there are millions of people in the Bay Area cluster starting a couple hours to the north, millions in the LA region starting a couple hours to the south, and about the same sized cluster in one Central Valley city (Bakersfield) a couple hours to the east.
Jaye
In Alameda County, Ca, Assurant was the only provider that offered a broad network and was not an EPO. An EPO is not a risk I’m willing to take, so I guess it’ll be Kaiser for me next year – if I’m going to have to change doctors anyhow, might as well go with the plan that’s least likely to make me switch again when they change up their network.
askew
@JustRuss:
Not just 1200 people unfortunately. My friend in the twin cities area works for them and is likely out of a job as well. They have a decent size office up here.
cahuenga
@KithKanan:
Hey neighbor!… Yup, Kaiser was who I was thinking of.
The Blues are in reality your only options here, especially for someone like me who travels often. If you had existing conditions or were eligible for subsidies the ACA was certainly a boon. For my wife and I the ACA shifted some out of pocket screening procedures to insurers but the net effect is negligible when compared to the bad old system
KithKanan
@cahuenga: Yeah, not all that much difference here.
I ended up on an employer group plan in 2014, but before that I was clinging to the individual plan I had been on since 2006 for dear life, knowing that certain pre-existing conditions meant I could most likely never get another one at an affordable cost if I lost it — so that peace of mind (and the elimination of rescission which both of the CA Blues were notorious for) are the biggest personal benefits of the ACA.
cahuenga
@KithKanan:
I’m self employed so had always been on the individual market (which has always been robbery).
Luckily for us, the advantages of living here dwarf the ridiculous cost of insurance.
craigie
We have Assurant, because they were the only ones who would cover the nearest emergency room to our house. But in all other ways, I have come to hate it, and just this week tried to switch – turns out you can’t do that, even if you are not getting subsidies. That was news to me.
So we are paying far too much until we can move out of it. But since I am self-employed, it isn’t going to get much better (read, cheaper).
pseudonymous in nc
I got into the habit of calling these dogshit policies from dogshit providers “tiger repellent insurance”.
Richard: how much of the market was/is made up of these providers that were basically insurance in name only, and where were/are they distributed?
low-tech cyclist
Richard, mind a quick question?
FL Gov Rick Scott says that FL shouldn’t expand Medicaid because it would “force Floridians who currently have private insurance on the federal exchange into the government-run Medicaid program – causing them to lose the plans they liked.”
Correct me if I’m wrong, but as I understand it, in states with the Medicaid expansion, nobody has to sign up for Medicaid: if they’re eligible both for Medicaid and for insurance on the Exchanges (IIRC, that’s if they’re between 100% and 138% of the poverty line), they can keep their insurance from the Exchanges if they’d rather. It’s just that Medicaid is pretty close to free, so given a choice, most people take Medicaid.
Do I have that right? Because I’d like to think the governor of one of our largest states, even one I disagree with on practically everything, isn’t spouting total nonsense.
(Meanwhile, as a party to King v. Burwell, he’s effectively trying to strip Floridians of their Exchange-based insurance, effectively taking three different sides on Obamacare, all at the same time. But no need to go there right now.)