Northwell Health subsidiary CareConnect pulling out of state exchange

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Northwell Health CEO Michael Dowling

Northwell Health announced that CareConnect, its insurance subsidiary, will be shutting down and dropping out of the Affordable Care Act market next year because of major losses, the company said Thursday.

CareConnect has 126,000 policyholders, including individuals, small businesses and other groups, with more than half of them on Long Island. The company said that these people will still be covered as they’re transferred to new providers.

Northwell Health pointed to the high payment to the ACA’s risk-adjustment pool worth $112 million, representing about 44 percent of the company’s small-group health plan revenue. They also noted a lack of federal assistance – namely that they never received a $150 million reimbursement from the federal government.

“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 Dowling said in a statement.

The risk-adjustment program redistributes funds from plans with lower-risk enrollees to plans with higher risk ones.

It aimed to push companies into insure more people and spread financial risk across the markets, according to the Kaiser Family Foundation, which studies healthcare issues.

In the first fiscal quarter this year, Northwell reported an operating loss of $36.2 million, with $22.7 million of that coming from CareConnect’s plan for individuals and small groups.

This follows CareConnect’s net loss of $157.9 million for 2016, despite premium revenue nearly tripling from $127.5 million to $360.8 million, according to regulatory filings.

The state Department of Financial Services Superintendent Maria T. Vullo said that while it is “unfortunate” that the federal government seems to have worked to undermine the ACA, the state’s healthcare market remains “robust” and with many choices.

“…We recognize that this decision will help Northwell focus on its core mission to deliver healthcare services to New Yorkers,” Vullo said. “In spite of recent federal efforts to destabilize markets and threats to dismantle or not enforce the ACA, New York’s healthcare market remains robust and consumers across New York have real choice of coverage.”

“DFS will work with CareConnect on an orderly transition to ensure that all of its members know their full options and continue to receive healthcare coverage without interruption,” Vullo added.

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