New York Hospital Cites Repeal Drama in Closing Obamacare UnitBy
Northwell’s CareConnect had ‘no viable path to profitability’
CEO points to Washington tumult, regulatory flaws in statement
New York State’s biggest hospital system plans to stop selling Obamacare plans, blaming a costly plank of the law and uncertain prospects for a fix amid a wider Washington brawl over health care.
Northwell Health said in a statement that it will wind down its four-year-old CareConnect Insurance Co. business over the next year, after it suffered financial losses linked to a program designed to steady the exchanges where consumers can buy coverage.
The hospital system also said that uncertainty around the fate of the Affordable Care Act had clouded its business prospects, contributing to its decision to pull down the shutters.
“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 chief executive officer.
Republicans in the Senate failed earlier this summer to pass a bill to repeal and replace the Obama administration’s signature health law. President Donald Trump has threatened to destabilize the law by ending critical subsidies, though so far the payments have continued.
CareConnect was started in 2013 as a way for Northwell to direct patients to its hospitals and doctors, promising a simple, limited network of health providers and lower prices. But the business faced the same pressures many other insurers faced in the Affordable Care Act marketplaces. Many misjudged the business, charging too little for premiums and then taking losses as patients used more care than they projected.
Dowling said Northwell saw “no viable path to profitability in the foreseeable future” for the business.
CareConnect said new insurers like itself were disadvantaged by an Affordable Care Act program called risk adjustment, because they had less information about their customers. The program is designed to transfer money from insurers with healthy customers to those with sick ones and relies on insurers to assess their own members.
The company was required to pay out large sums under the program, fueling a $156.6 million loss in 2016, up from $31.8 million a year earlier, according to regulatory filings. New York’s insurance regulator is making changes to the program for 2018 to limit how much insurers can pay in or receive. CareConnect said it would have been profitable this year if it were not required to pay $112 million into the risk-adjustment program.
New York’s insurance regulator also blamed the federal government.
“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,” Maria Vullo, the superintendent of the Department of Financial Services, said in a statement.
Richard Allen, the president of American Corporate Benefits Inc., said he often recommended CareConnect plans to his clients, because the insurance plans offered a good choice of doctors and hospitals.
“This is going to be highly disruptive to the insurance market and it’s very stressing,” he said by phone. “These are quality, quality institutions and their rate was highly competitive.”
Northwell, formerly known as North Shore-LIJ Health System, is New York state’s biggest hospital system. The group includes 22 hospitals, including Northern Westchester Hospital, Lenox Hill Hospital, and North Shore University Hospital.
The insurer had 118,086 customers as of June 30, with about half enrolled in small-business plans, and 30,476 in Obamacare’s individual market, according to a regulatory filing. The rest were enrolled in large-group coverage. The company offered coverage in New York City, on Long Island and in Westchester County.