Northwell: Blame Obamacare for CareConnect’s demise

Un-insured: They were all smiles in CareConnect's promo ads, but probably not anymore.
By GREGORY ZELLER //

A key component of the Northwell Health system’s core strategy to manage entire health populations is coming off the table.

The health system announced late Thursday that it’s pulling the plug on its East Hills-based CareConnect Insurance Co., which has grown to cover some 125,000 customers since launching as New York State’s first provider-owned commercial insurance company in 2013.

While it remains committed to “fortifying its population-health capabilities,” Northwell is “winding down CareConnect and withdrawing from New York State’s insurance market over the next year,” the health system said.

A main culprit in the death of the four-year-old insurance provider is the Affordable Care Act. Northwell Health specifically cited the ACA in its termination announcement, noting “CareConnect would have been profitable in 2017 if it were not for the $112 million it had to pay” into Obamacare’s risk-adjustment pool.

That basically wiped out 44 percent of total 2016 revenues from the insurance company’s small-group health plan. Designed for businesses with fewer than 100 employees, the small-group plan is basically CareConnect’s bread and butter.

A similar $100 million-plus risk-adjustment payment was waiting in 2018 to wipe out a substantial chunk of 2017’s small-group profits, prompting Northwell Health’s brain trust to finally throw in the towel, according to Northwell Health President and CEO Michael Dowling, who fingered not only Obamacare but a dysfunctional U.S. Congress.

“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,” Dowling said Thursday.

Michael Dowling: Solid plan foiled by a shaky system.

The CEO also slammed the federal government’s “refusal to honor promises of additional funding,” though Dowling did praise the New York State Department of Financial Services for taking “positive steps” to reduce the financial impact of the risk-adjustment program on CareConnect and other small insurers writing individual and small-group policies.

Among other efforts, the New York State DFS issued an emergency regulation that would create a “market stabilization pool” to assist smaller insurers financially bludgeoned by the ACA’s risk-assessment payments.

But that wasn’t enough to save CareConnect, Dowling noted.

“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,” the CEO said.

Obamacare’s risk-adjustment program was designed to prevent insurers from “cherry-picking” healthy customers, who are less expensive to cover. In a nutshell, it requires carriers with a particularly healthy customer base to transfer money to carriers whose membership is relatively unhealthy.

But “defects in the small-group program” have created a scenario in which New York’s smaller insurers, such as CareConnect, are subsidizing larger competitors, according to Northwell Health, which will be submitting a withdrawal plan to the DFS.

The insurance company plans to continue operations for the next year and “work with its customers, businesses and others to help transfer policyholders to other health plans,” Northwell Health said Thursday. Northwell will also help CareConnect’s 200-plus employees – most of whom will continue to be employed by the insurance company throughout the transition – “find other suitable positions within the health system.”

While he knows that ending the CareConnect experiment now is the right call, Dowling expressed regret at withdrawing from the New York State insurance marketplace – and noted he still believes in the CareConnect strategy “and the benefits that come from value-based care.”

“CareConnect has delivered on its promise to offer consumers affordable access to excellent care,” the CEO said. “I am proud of what we have built and the value we bring to individuals and businesses.

“The market challenges confronting us require that we continue to be bold in our thinking,” Dowling added. “Moving forward on our population-health journey, we will continue to explore new models of care delivery that will help us accomplish the triple aim of improving the patient experience and the health of our communities, and reducing the per-capita cost of care.”


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