New York state’s biggest hospital system is ending a four-year foray into selling health coverage under the Affordable Care Act individual major medical market rules, closing its insurance unit after financial losses.
Northwell Health said in a statement that it will wind down its CareConnect Insurance Co. business over the next year.
“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 president and chief executive officer.
The insurance unit was started in 2013 as a way for the hospital system to direct patients to Northwell’s hospitals and doctors, promising a simple, limited network of health providers as well as lower prices. But the business faced the same pressures as many other insurers that entered into the markets created by the Affordable Care Act. Many misjudged the business, charging too little for premiums and then taking losses as patients used more care than they projected.
CareConnect has said it was put at a disadvantage by an Affordable Care Act program called risk adjustment, designed to transfer money from insurers with healthy customers to those with sick ones. The company had been 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.