Northwell Health To Shut Down Insurance Unit Due To Affordable Care Act

Northwell Health, the state's largest health care provider, announced on Thursday it will be shutting down its provider-owned CareConnect insurance unit, calling the plan financially unstable due to President Barack Obama's health care law.

Northwell’s President and Chief Executive Officer Michael J. Dowling put the blame on the uncertainty surrounding the Affordable Care Act (ACA) in Washington, D.C.

“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,” he said in a press release.

The East Hills-based CareConnect will be withdrawing from New York State’s insurance market over the next year while it works with and continues to pay claims for customers and businesses that need to transfer health plans.

Northwell serves approximately 125,000 customers who are covered through its CareConnect Insurance Company, New York State’s first provider-owned commercial insurance company that was established in the fall of 2013.

More than 200 CareConnect employees will also lose their jobs following the transition period. Northwell said it will assist the employees in finding new positions within the health system.

Northwell says CareConnect was not profitable in 2017 due to the ACA’s risk-adjustment program, which was designed to prevent insurers from “cherry-picking” healthy, less expensive customers. The risk-adjustment program caused smaller insurers like CareConnect to subsidize larger competitors that have customers who are more expensive to cover.

In 2017, CareConnect had to put $112 million into the ACA’s risk-adjustment pool, which was 44 percent of the unit’s revenue in 2016 from its small-group health plan (businesses with 100 or fewer employees), Northwell reports. According to Northwell, CareConnect would have a risk-adjustment payment of more than $100 million in 2018 from its 2017 small-group revenue.

Dowling said CareConnect is unlikely to become profitable despite the NYS Department of Financial Services reducing the financial impact of the risk-adjustment program on CareConnect (and other small insurers that write individual and small-group health policies) earlier this year.

Dowling recently made Modern Healthcare's "100 Most Influential People In Healthcare" list for the eleventh year in a row. Republican senators— Lisa Murkowski (Alaska), Susan Collins (Maine) and John McCain (Arizona)— who blocked the party's attempt to repeal the ACA in July topped Modern Healthcare's rankings.

Image of LIJ Medical Center in New Hyde Park, which is part of the Northwell Health system, via Northwell Health