Business & Finance

Residents Lose Major Health Insurance Option After CareConnect Announces Closure


SOMERS, N.Y. -- Less than two years after Health Republic of New York withdrew from the health insurance market, another new player on the scene is calling it quits.

Northwell Health announced today that its popular insurance product, CareConnect, is folding.

“It has become increasingly clear that continuing the CareConnect health plan is financially unsustainable, given the failure of the federal government and Congress to correct regulatory flaws that have destabilized insurance markets and their refusal to honor promises of additional funding,” said Michael J. Dowling, Northwell’s president and chief executive officer. 

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"As an early adopter of population health strategies," according to a company release, "Northwell Health has moved aggressively over the past decade to develop new, innovative approaches to organizing care delivery in ways that bring the highest value to patients, insurance payers, employers and other customers. "As a result, Northwell has negotiated a multitude of value-based insurance contracts that make the health system responsible for managing the care of more than 400,000 individuals, including 125,000 customers covered through its CareConnect Insurance Company."

According to Northwell Health, CareConnect would have been profitable in 2017 if it were not for the $112 million it had to pay into the Affordable Care Act’s (ACA) risk-adjustment pool – amounting to about 44 percent of CareConnect’s 2016 revenue from its small-group health plan (businesses with 100 or fewer employees). CareConnect would be facing another risk-adjustment payment of more than $100 million in 2018 from its 2017 small-group revenue. 

The State of New York is blaming Washington, DC for CareConnect's failure.

“While it is unfortunate that the continued uncertainty across the nation due to the repeated actions of the federal government to undermine the Affordable Care Act at this time in the insurance cycle has caused CareConnect to begin an orderly wind down from the market, we recognize that this decision will help Northwell focus on its core mission to deliver healthcare services to New Yorkers," said New York Department of Financial Services (DFS) Superintendent Maria T. Vullo.

"In spite of recent federal efforts to destabilize markets and threats to dismantle or not enforce the ACA, New York’s healthcare market remains robust and consumers across New York have real choice of coverage," Vullo said. "DFS will work with CareConnect on an orderly transition to ensure that all of its members know their full options and continue to receive healthcare coverage without interruption. Once again we call on the federal government to end this continued uncertainty, immediately act to protect our markets by fully paying the cost-sharing subsidies for good and not piecemeal, making the overdue risk corridor payments, fully enforcing the individual mandate, and stopping once and for all the partisan attacks on healthcare for all Americans.

"We appreciate that some members of Congress are seeking to turn this corner in a bipartisan manner and to maintain the ACA's protections to stabilize markets."

For its part, Northwell Health was appreciative of DFS's steps to shore up the health insurance market in New York. 

"However, the continuing uncertainty in Washington about the future of the ACA, intractable regulatory problems and the federal government’s broken promise of so-called `risk-corridor’ payments to insurers provide us with no viable path to profitability in the foreseeable future,” Dowling said.

The ACA’s risk-adjustment program was designed to prevent insurers from “cherry-picking” healthy customers who are less expensive to cover, the Northwell release said. It attempts to accomplish this by requiring carriers with particularly healthy customers to transfer money to carriers whose membership is relatively unhealthy. However, defects in the small-group program have resulted in New York’s smaller, more-innovative insurers like CareConnect to subsidize larger competitors, which have more in depth medical histories on their customers than start-ups that have been in business for less than four years.

Northwell will be submitting a withdrawal plan to DFS, but it assures customers that CareConnect operations will continue over the next year as the company works to help transfer policy holders to other health plans. Throughout the transition, CareConnect will continue to pay claims and serve members, patients and providers. Many of CareConnect’s more than 200 employees will continue to have jobs during this transition period, and Northwell will assist them in trying to find other suitable positions within the health system. 

“As much as we regret having to make this decision to withdraw from the market, I continue to believe in the strategy of CareConnect, population health and the benefits that come from value-based care,” Mr. Dowling said. 

CareConnect was established in the fall of 2013 as New York State’s first provider-owned commercial insurance company. One of Northwell’s primary goals in creating the health plan was to align the health system’s clinical performance and outcomes with financial incentives that historically have benefitted insurance companies only – not providers who are on the front lines of delivering care and the patients they serve. 

“CareConnect has delivered on its promise to offer consumers affordable access to excellent care,” Mr. Dowling said. “I am proud of what we have built and the value we bring to individuals and businesses.” In addition to the company’s significant enrollment, 96 percent of businesses that chose CareConnect in 2016 rated the company as either “excellent” or “good.” 

Despite this setback, Mr. Dowling emphasized that CareConnect represents just one piece of Northwell’s comprehensive strategy to better manage the health of populations it serves throughout the region and slow the growth of health care costs. “The market challenges confronting us require that we continue to be bold in our thinking,” he said. “Moving forward on our population health journey, we will continue to explore new models of care delivery that will help us accomplish the triple aim of improving the patient experience and the health of our communities, and reducing the per capita cost of care.”

Northwell Health is New York State’s largest health care provider and private employer, with 22 hospitals, including nearby Northern Westchester Hospital, over 550 outpatient facilities and nearly 15,000 affiliated physicians.


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