Iowa’s third largest health insurer cuts 1,500 jobs, exits health insurance business
As posted on DesMoinesRegister.com
Principal Financial Group said Thursday that it will leave the
medical insurance business, further reducing competition among health
insurers in Iowa.
Principal will transfer the renewal rights for its health insurance customers in Iowa and 30 other states to UnitedHealthcare over the next 36 months.
The move will guarantee that all Principal health insurance customers will be able to get a quote for a new policy despite pre-existing conditions, said Iowa Insurance Commissioner Susan Voss.
The health insurance industry is consolidating, Voss said, driven by
a combination of market forces and increased government regulation.
UnitedHealthcare, of Minnetonka, Minn., is owned by publicly traded UnitedHealth Group, one of the nation’s largest private health insurers and the second-largest health insurer in Iowa after Wellmark Blue Cross and Blue Shield.
Principal said about 1,500 jobs in its medical insurance unit, including about 650 in the Des Moines area, will be eliminated in the next three years. About 150 of those cuts will be made within the next 30 days.
Principal has about 14,000 employees worldwide and about 7,000 workers in the Des Moines area.
The insurer said some employees could be hired by UnitedHealthcare; others will find jobs within Principal. Severance and outplacement assistance will be available.
Neither company said whether money would change hands in the deal. Officials at both insurers declined to say whether UnitedHealthcare would pay Principal for the right to renew Principal policies as they come due during the next three years.
Principal will continue to offer vision, dental and disability policies.
The move will free $100 million to $120 million of capital that can be used to expand other parts of Principal’s business, said Principal’s Dan Houston.
He said the company decided to quit the health care business because it was not growing as fast as three other areas where Principal wants to commit resources – the retirement industry, where Principal is the largest administrator of 401(k) plans in the nation; institutional asset management; and international operations.
New federal and state regulations were not a big factor in the decision, Houston said, although he added that the health insurance industry will “continue to be under the shadow of a lot of regulatory matters” for at least the next five years.
If Principal stayed in the business, it faced significant new investments, said Principal Vice President Mary O’Keefe. “The health insurance industry increasingly requires scale,” she said. The company believes that money could be better spent in other areas, O’Keefe said.
Wellmark spokesman Rob Schweers said he doubted Principal’s exit from the market would affect his company much, because more than 90 percent of Principal’s health insurance business is in other states, while Wellmark focuses on Iowa and South Dakota.
Also, he said, Principal does not sell individual health policies or Medicare supplement plans, which are significant parts of Wellmark’s business.
Principal handles health insurance for about 14,000 businesses with about 830,000 employees and dependents, said Houston, president of Principal’s retirement, insurance and financial services division.
UnitedHealthcare executive Dan Kueter declined to say how many Principal customers the company believes it can convert to UnitedHealthcare.
The company’s products and services in Iowa are similar to Principal’s, but the company’s national network is much larger, said Kueter, chief of UnitedHealthcare’s operations in Iowa and central Illinois. Nationally, he said, the company’s network includes 600,000 doctors and other health professionals, 5,000 hospitals and 60,000 pharmacies.
If UnitedHealthcare re-news all Principal customers, the insurer will increase its business in Iowa by 55 percent, to annual premiums of $323 million. Wellmark has $2.1 billion in premiums, according to 2009 data from the Iowa Insurance Division. That does not include fees the companies receive for administering self-insured plans for large corporations.
Principal’s nationwide health insurance premiums amounted to $1.6 billion in 2009. If all those customers renew with UnitedHealthcare, they will increase the company’s nationwide business by 5 percent, pushing total premiums to $33.6 billion.
Insurance Commissioner Voss said Principal’s share of Iowa’s health insurance market has been declining for several years.
Principal said the decision will negatively affect earnings this year because it will cut off a source of income. As a result, third-quarter operating results will be down 3 to 4 cents a share and full-year results will be down by 18 to 20 cents a share, the company said.
The companies announced the agreement Thursday morning before the markets opened. Principal shares lost 3 cents to close at $25.92. UnitedHealth shares gained 1 cent to close at $35.12.
Original Post: http://www.desmoinesregister.com/article/20101001/BUSINESS/10010350/1001/NEWS/Principal-cuts-1-500-jobs-exiting-health-businessPrincipal will transfer the renewal rights for its health insurance customers in Iowa and 30 other states to UnitedHealthcare over the next 36 months.
The move will guarantee that all Principal health insurance customers will be able to get a quote for a new policy despite pre-existing conditions, said Iowa Insurance Commissioner Susan Voss.
The decision means the disappearance of the third-largest health
insurer in Iowa at a time when half a dozen other small insurers have
told the Iowa Insurance Division that they also plan to quit selling
health insurance in Iowa.
UnitedHealthcare, of Minnetonka, Minn., is owned by publicly traded UnitedHealth Group, one of the nation’s largest private health insurers and the second-largest health insurer in Iowa after Wellmark Blue Cross and Blue Shield.
Principal said about 1,500 jobs in its medical insurance unit, including about 650 in the Des Moines area, will be eliminated in the next three years. About 150 of those cuts will be made within the next 30 days.
Principal has about 14,000 employees worldwide and about 7,000 workers in the Des Moines area.
The insurer said some employees could be hired by UnitedHealthcare; others will find jobs within Principal. Severance and outplacement assistance will be available.
Neither company said whether money would change hands in the deal. Officials at both insurers declined to say whether UnitedHealthcare would pay Principal for the right to renew Principal policies as they come due during the next three years.
Principal will continue to offer vision, dental and disability policies.
The move will free $100 million to $120 million of capital that can be used to expand other parts of Principal’s business, said Principal’s Dan Houston.
He said the company decided to quit the health care business because it was not growing as fast as three other areas where Principal wants to commit resources – the retirement industry, where Principal is the largest administrator of 401(k) plans in the nation; institutional asset management; and international operations.
New federal and state regulations were not a big factor in the decision, Houston said, although he added that the health insurance industry will “continue to be under the shadow of a lot of regulatory matters” for at least the next five years.
If Principal stayed in the business, it faced significant new investments, said Principal Vice President Mary O’Keefe. “The health insurance industry increasingly requires scale,” she said. The company believes that money could be better spent in other areas, O’Keefe said.
Wellmark spokesman Rob Schweers said he doubted Principal’s exit from the market would affect his company much, because more than 90 percent of Principal’s health insurance business is in other states, while Wellmark focuses on Iowa and South Dakota.
Also, he said, Principal does not sell individual health policies or Medicare supplement plans, which are significant parts of Wellmark’s business.
Principal handles health insurance for about 14,000 businesses with about 830,000 employees and dependents, said Houston, president of Principal’s retirement, insurance and financial services division.
UnitedHealthcare executive Dan Kueter declined to say how many Principal customers the company believes it can convert to UnitedHealthcare.
The company’s products and services in Iowa are similar to Principal’s, but the company’s national network is much larger, said Kueter, chief of UnitedHealthcare’s operations in Iowa and central Illinois. Nationally, he said, the company’s network includes 600,000 doctors and other health professionals, 5,000 hospitals and 60,000 pharmacies.
If UnitedHealthcare re-news all Principal customers, the insurer will increase its business in Iowa by 55 percent, to annual premiums of $323 million. Wellmark has $2.1 billion in premiums, according to 2009 data from the Iowa Insurance Division. That does not include fees the companies receive for administering self-insured plans for large corporations.
Principal’s nationwide health insurance premiums amounted to $1.6 billion in 2009. If all those customers renew with UnitedHealthcare, they will increase the company’s nationwide business by 5 percent, pushing total premiums to $33.6 billion.
Insurance Commissioner Voss said Principal’s share of Iowa’s health insurance market has been declining for several years.
Principal said the decision will negatively affect earnings this year because it will cut off a source of income. As a result, third-quarter operating results will be down 3 to 4 cents a share and full-year results will be down by 18 to 20 cents a share, the company said.
The companies announced the agreement Thursday morning before the markets opened. Principal shares lost 3 cents to close at $25.92. UnitedHealth shares gained 1 cent to close at $35.12.
Contributed via Facebook by Dan Durell
Popularity: 1% [?]
Short URL: http://redwhitebluenews.com/?p=5812
No comments:
Post a Comment