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Northwell Health Dropping CareConnect Health Plan

By Philip Betbeze  
   August 24, 2017

The health plan is "financially unsustainable," says the New York-based health system's CEO, thanks to the failure of Congress to correct regulatory flaws in the Affordable Care Act.

More than 125,000 New Yorkers will have to find a new health insurance provider after Northwell Health shuts down its CareConnect health plan over the next year.

Founded in 2013, CareConnect was seen as a cornerstone for the 22-hospital health system’s foray into so called population health, which is aimed at cutting healthcare expenditures by focusing interventions on groups of individuals.

And while Michael Dowling, the nonprofit’s president and CEO, says the health system will continue to aggressively seek out innovative ways of organizing care delivery to bring value to patients, payers and employers, health insurance won’t be among them.

He blamed broken promises by lawmakers and regulatory flaws, not poor management or unforeseen reimbursement challenges, for the decision.

“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.

He claimed that CareConnect would have been profitable in the 2017 fiscal year if it had not been forced to pay $112 million into the Affordable Care Act’s risk adjustment pool, which amounted to about 44% of the health plan’s revenue from its small group health plan. Further, he claimed that CareConnect would have faced another risk adjustment payment of more than $100 million in 2018 based on its small group revenue.

Risk adjustment payments were designed to prevent health plans from “cherry picking” groups of healthy patients who are less expensive to cover.

But Northwell claims the formula that requires carriers with healthier customers to transfer money to carriers whose membership is less healthy is fundamentally flawed because smaller, “more innovative” insurers like CareConnect must subsidize larger competitors, who have longer and more in-depth medical histories on their customers than “start-ups” like CareConnect, which has been in business for less than four years.

“I greatly appreciate the positive steps taken by the New York State Department of Financial Services earlier this year to reduce the financial impact of the risk-adjustment program on CareConnect and other small insurers writing individual and small-group health policies,” said Dowling.

“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,” Mr. Dowling said.

One of Northwell’s primary goals in creating the health plan was to align the system’s clinical outcomes and performance with financial incentives that previously had accrued only to insurance companies.

CareConnect operations will continue over the next year as the company works to transfer policy holders to other health plans, while continuing to pay claims during the transition. Many of its more than 200 employees will continue to work during the transition, and Northwell says it will assist them in trying to find other suitable positions within the health system.

Established in 2013, CareConnect was the state’s first provider-owned insurance company. Behind only Pennsylvania at 1.9 million enrollees, and tied with Michigan, New York had 1.6 million people in provider-led health plans at the end of 2014.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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