Insurer Quits Offering Small Firms Health Plans

John Alden Financial Corp., a major insurer, has told California officials it plans to stop selling health plans to small businesses in the state.

The Miami-based insurance giant notified regulators of its withdrawal in a letter on Jan. 23, a spokeswoman for the Department of Insurance said Tuesday. An executive at the company’s California headquarters in Irvine refused to comment.

Earlier last month, Alden announced plans to reduce its presence or completely withdraw from certain states in which pressures from managed care and changing regulation have increased the costs of doing business in the small-group market. At the time, the company didn’t specify the states.

California insurance experts, however, said Tuesday that both market and regulatory factors in the state have made it harder for Alden and others that cater to small businesses to make money.

Other insurers have stopped writing similar policies in the state in the wake of legislation in the early 1990s restricting rate increases on small plans, according to the Insurance Department spokeswoman. Legislation also required insurers to issue policies to cover even terminal cases, but limited rates to be charged for these policies.

Sam Cunningham, executive vice president of Anderson and Anderson, an Irvine-based insurance broker, said Alden also priced itself out of the market by continuing to offer preferred provider plans instead of health maintenance plans, which are cheaper and more popular.

“If I’m a small employer and can buy PacifiCare for half the cost of John Alden, that’s not a hard decision to make,” Cunningham added.