Assurant 2012 Annual Report Download - page 15

ASSURANT, INC.2012 Form10-K 7
PARTI
ITEM 1 Business
Assurant Health
For the Years Ended
December31, 2012 December31, 2011
Net earned premiums and other considerations:
Individual markets $ 1,178,878 $ 1,251,447
Small employer group 410,581 466,853
TOTAL $ 1,589,459 $ 1,718,300
Segment net income $ 52,000 $ 40,886
Loss ratio(1) 73.9% 74.0%
Expense ratio(2) 26.0% 26.3%
Combined ratio(3) 98.5% 98.8%
Equity(4) $ 304,166 $ 405,200
(1) The loss ratio is equal to policyholder benefits divided by net earned premiums and other considerations.
(2) The expense ratio is equal to selling, underwriting and general expenses divided by net earned premiums and other considerations and fees and other income. (Fees and other income
are not included in the above table.)
(3) The combined ratio is equal to total benefits, losses and expenses divided by net earned premiums and other considerations and fees and other income. (Fees and other income are not
included in the above table.)
(4) Equity excludes accumulated other comprehensive income.
Products and Services
Assurant Health competes in the individual medical insurance market
by o ering major medical insurance, short-term medical insurance, and
limited bene t coverages to individuals and families. Our products are
o ered with di erent plan options to meet a broad range of customer
needs and levels of a ordability. Assurant Health also o ers medical
insurance to small employer groups.
 e Patient Protection and A ordable Care Act and the Health Care
and Education Reconciliation Act of 2010, and the rules and regulations
thereunder (together, “the A ordable Care Act”) were signed into law
in March2010 and represent signi cant changes to the U.S. health
care system.  e legislation is far-reaching and is intended to expand
access to health insurance coverage over time.  e legislation includes
requirements that most individuals obtain health insurance coverage
beginning in 2014 and that most large employers o er coverage to their
employees or they will be required to pay a  nancial penalty. In addition,
the new laws encompass certain new taxes and fees, including limitations
on the amount of executive compensation that is tax deductible and
new fees which may not be deductible for income tax purposes. We
believe that the Act will lead to sweeping and fundamental changes to
the U.S. health care system and the health insurance industry.
 e legislation will also impose new requirements and restrictions,
including, but not limited to, guaranteed coverage requirements,
prohibitions on some annual and all lifetime limits on amounts paid
on behalf of or to our members, increased restrictions on rescinding
coverage, the establishment of minimum medical loss ratio (“MLR”)
requirements, the establishment of state insurance exchanges and
essential bene t packages, and greater limitations on product pricing.
One provision of the A ordable Care Act, e ective January1, 2011,
established a MLR designed to ensure that a minimum percentage of
premiums is paid for clinical services or health care quality improvement
activities.  e A ordable Care Act established a MLR of 80% for
individual and small group business and 85% for large group business.
If the actual loss ratios, calculated in a manner prescribed by the
Department of Health and Human Services (“HHS”), are less than
the required MLR, premium rebates are payable to the policyholders
by August1 of the subsequent year. Although the HHS has issued
 nal regulations to implement the MLR and rebate provisions of the
A ordable Care Act, certain issues remain to be fully clari ed, including
further clari cation on the state insurance exchanges, the risk mitigation
programs, essential bene t package requirements, the actuarial value
calculations, and the new fees to be enacted.
Although the dynamics and characteristics of the post-reform market
will be di erent, we believe there are still signi cant opportunities
for Assurant Health to sell individual medical insurance products.
Specialty expertise will still be required and we believe that we can earn
adequate pro ts in this business over the long-term, without making
large commitments of capital. In order to achieve these goals, we have
taken signi cant steps to reduce operating and distribution costs and
modify our product lines. We have reduced operating costs signi cantly
and redesigned our product portfolio to o er certain supplemental and
a ordable choice products, and we continue to build on these e orts.
We may re ne our strategy as new regulations are issued or additional
regulatory agency actions are taken in the wake of the A ordable Care
Act.  e full impact of the Act will not be known for many years.
Individual Medical
Our medical insurance products are sold to individuals, primarily
between the ages of 18 and 64, and their families, who do not have
employer-sponsored coverage. We o er a wide variety of bene t plans
at di erent price points, which allow customers to tailor their coverage
to  t their unique needs.
Small Employer Group Medical
Our group medical insurance is primarily sold to small companies with
two to  fty employees, although larger employer coverage is available.
As of December31, 2012, our average group size was approximately
 ve employees.
E ective in March2012 we entered into a new provider network
arrangement with Aetna Signature Administrators ®.  is multi-year
agreement provides our major medical customers with access to more