Milwaukee-based Assurant Health, which sells health coverage to individuals and small employers, is cutting jobs in response to "significant changes in the post-reform health insurance marketplace," the company announced in a statement.
The Milwaukee Journal Sentinel reports that the insurer, which is part of New York-based Assurant Inc., will trim 130 jobs in Milwaukee and Plymouth, Minn. by January. It has about 1,600 employees in Milwaukee.
The Patient Protection and Affordable Care Act is expected to pose challenges, and perhaps reduce profitability, for insurers like Assurant in the individual and small-group markets. It will prohibit carriers from denying coverage based on preexisting conditions--a key tool in selecting profitable customers--and limit the percentage of premium spent on administrative costs.
In an investors conference call last month, Robert Pollock, Assurant Inc.'s CEO, said the company's "historical strength has been world-class risk management around underwriting." His company, he added, will have to lower its costs, but he believes it can earn solid long-term returns despite the provisions of the insurance reform law.
This could be a harbinger of reform-related changes in the insurance industry. Maureen Fahey, the national healthcare reform leader for KPMG, predicts the reform law's establishment of insurance exchanges and medical loss ratio minimums will reduce margins and force insurers to compete more on quality and consumer service. They'll have to get more creative and administratively efficient. "I believe we'll have a fair amount of consolidation in the market as a result," she told FierceHealthPayer.
The layoffs will result in charges to Assurant Health's operating income of about $5.5 million for the third quarter and $1.3 million for the fourth quarter. Last year, parent company Assurant Inc. reported net income of $430.6 million on revenue of $8.7 billion.