Northwell Health to shut down its insurance business

The largest hospital system in New York, Northwell Health, announced it will wind down operations of its CareConnect insurance division due to financial losses caused by the Affordable Care Act’s risk adjustment program.

In a press release, Northwell said the 4-year-old CareConnect would have been profitable in 2017 if it weren’t for 44 percent of its small group revenue—$112 million—going into ACA’s risk adjustment pool. Other newer, smaller insurers have criticized and even sued CMS over the program, claiming it’s been a “reverse Robin Hood scheme” which transfers money to larger, more established insurance companies which charge higher premiums.

Northwell made a similar argument, saying the end result has been smaller insurers subsidizing larger competitors which have more “in depth medical histories on their customers,” and making profitability very difficult to achieve.

“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,” Northwell President and CEO Michael J. Dowling said in a statement.

Dowling added that despite CareConnect’s closure, the health system still has faith in its strategies revolving around population health management and value-based care.

To state regulators, the blame for the insurance plan’s closure falls on Congress and federal officials. Maria Vullo, superintendent of the New York Department of Financial Services cited “repeated actions of the federal government to undermine” the ACA in her response to the announcement.

“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,” she said.

As of June 30, more than 118,000 people were covered through CareConnect, with about 30,000 covered through the ACA market. Northwell said the insurer would continue operations over the next year to transfer policyholders. It also said it would help the insurance division’s 200 employees “ in trying to find other suitable positions within the health system.”