Assurant Inc. (AIZ:US), the insurer adjusting rates for New York homeowners after regulators challenged its prices, has been cited by the U.S. for “unreasonable” health premium increases more times than any competitor.
Assurant units (AIZ:US) raised premiums in excess of 10 percent on individual health plans 31 times in 12 states since October, according to documents provided by the U.S. Center for Consumer Information and Insurance Oversight. The greatest increase was 24 percent on plans covering 17,666 people in Wisconsin in May.
Assurant is the only publicly traded health insurer cited by the agency this fiscal year. The health data may spur Congress to grant more power to force rescissions in premium increases or impose punishments for pricing deemed unreasonable.
“If you see enough of this, given a certain landscape of politics, there may actually be teeth put into some of these laws,” said Les Funtleyder, a fund manager who focuses on the health-care industry at New York-based Poliwogg. “Insurers aren’t exactly a public fan favorite. They’re sort of an easy target for Congress, if it’s so inclined.”
Assurant said in an e-mailed statement that its “recent rate filings are actuarially justified and appropriate.” A spokeswoman, Sue Pierman, wouldn’t make any company executives available for an interview.
A committee of the National Association of Insurance Commissioners, which represents state regulators, plans a public hearing on lender-placed insurance today in Atlanta.
Assurant, which gets about 22 percent of revenue from health insurance, has been stung by scrutiny of its larger business that sells policies for mortgage lenders when distressed homeowners let their original coverage lapse. The company is the second-worst performer in the Standard & Poor’s 500 Financials Index (S5FINL) this year and fell 17 percent (AIZ:US) in May, following a call by New York regulators for hearings on the lender-placed home insurance business.
Assurant rose less than 1 percent today to close at $36.23.
The 2010 health law gave the federal government the power to review health-premium increases in states that don’t police rates adequately. There were 10 such states a year ago, and seven now. More than 70 percent of unreasonable determinations issued since 2010 involved three Assurant subsidiaries: John Alden Life Insurance, Time Insurance and Union Security Insurance, according to the insurance oversight center.
Assurant said it didn’t withdraw or reduce any increases after the government objected. “In some instances, we have reviewed filings with state Departments of Insurance and have made changes as appropriate if actuarially justified,” it said.
Premiums for employer-sponsored health insurance, the most common type in the U.S., rose an average of 9 percent for family plans in 2011, the most recent data available from the nonprofit Kaiser Family Foundation, based in Menlo Park, California. The 31 Assurant rate increases cited by the Center for Consumer Information and Insurance Oversight ranged from 12 percent to 24 percent, according to Bloomberg calculations.
Assurant’s health insurance companies focus on covering individuals and very small businesses, carving out a niche “where they don’t really have to face the big boys every day” such as industry leader UnitedHealth Group Inc. (UNH:US), said John Nadel, an analyst at Sterne Agee & Leach Inc. in New York.
“The bigger companies are not going to really bother with a 5- or 10-person company,” he said.
The government has declared rate increases proposed by four providers other than Assurant to be unreasonable. They include: three plans in Washington owned by Group Health Cooperative, a nonprofit insurer; six plans in Alabama, Arizona, Nebraska, Pennsylvania, Virginia and Wyoming owned by Trustmark Mutual Holding Co.; one plan in Arizona owned by J&P Holdings Inc. of Bedford Park, Illinois; and an insurance company in Pennsylvania founded by the Mennonite Church.
Health plans covering more than 3 million people proposed premium increases of 10 percent or more since September, when the rate-review program began, Mike Hash, the acting director of the consumer and insurance center, said in an e-mail sent through a spokesman, Jason Young.
The reviews have provided consumers “unprecedented access to information from their insurance companies as to why the companies believe an increase is necessary, as well as to the reasoning of states and CMS as to whether the companies’ regulators agree with the companies’ request,” Hash said, using an acronym for his office’s parent agency, the U.S. Centers for Medicare and Medicaid Services.
Assurant’s premium increases were labeled “unreasonable” because they would result in the insurer spending too little of its premium revenue on medical claims, according to reports the government posted in an online database.
Under the health law, insurers are required to spend at least 80 percent of the revenue they collect in premiums on medical care, known as the medical loss ratio. They can keep 20 percent for profit and administrative costs; any excess must be rebated to customers.
In Wisconsin, where two Assurant units proposed 24 percent increases, the medical loss ratio would be as low as 58.8 percent for one plan, the government data show. An Assurant program in Pennsylvania that covers 67 small-business workers would have a medical loss ratio as low as 46.1 percent after a 15 percent rate increase it proposed, the government said. That was the lowest ratio of any Assurant plan reviewed.
Insurers paid about $1.1 billion in rebates to about 12.8 million people for policies that didn’t meet the government’s medical loss requirement in 2011, according to the U.S. Assurant said it issued 192,237 rebates totaling about $44 million.
Even if Assurant pays rebates, it may benefit the company because “you get to carry that extra cash for a year,” Poliwogg’s Funtleyder said.
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