Northwell Health shutters its insurance unit following losses

Affordable Care Act highlighted
Northwell Health's insurance arm will stop offering Affordable Care Act exchange plans. (Getty/Ellenmck)

Northwell Health, New York state’s largest healthcare system, will shutter its health insurance business after experiencing steep financial losses.

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Northwell announced the decision Thursday, noting that CareConnect Insurance Company, which had sold plans on the state's Affordable Care Act exchange, would have been profitable in 2017 if it weren't for the fact that it had to make a $112 million payment into the federal risk adjustment program. The system said it would have to make $100 million more in risk adjustment payments in 2018.

Northwell Health CEO Michael Dowling said that ongoing uncertainty about the future of the ACA and federal insurance regulations also contributed to the decision, with all these factors making it “increasingly clear” that CareConnect is “financially unsustainable.”

“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 health system launched CareConnect in 2013 to align its clinical performance goals with financial incentives that typically benefit payers. About 125,000 people are enrolled in CareConnect plans.

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The risk corridor program, which assesses charges to insurers with lower-than-expected claims and makes payments to those with higher-than-expected claims, has only been able to pay out a small portion of what it owes to health insurers, as not enough ended up paying into the program. Risk adjustment, meanwhile, works by transferring funds from plans with lower-risk enrollees to plans with higher-risk enrollees. The risk corridor program ended after 2015, while risk adjustment is permanent.

Northwell said that it will wind down its offerings through CareConnect over the next year. Through the transition, it will continue to pay enrollees’ claims and will work to transfer its members to other health plans. The system will also try to find jobs for the more than 200 employees of CareConnect elsewhere within Northwell.

Though it’s getting out of the ACA exchange game, Northwell remains committed to value-based care, payment reform and reducing healthcare costs, Dowling said.

“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,” Dowling said.