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New York Hospital System Shuts ACA Unit After Losses

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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.

(Related: Health Bill May Shut Out One-Sixth of Sick: CBO)

“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.

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 the Affordable Care Act 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.

— Read Aon Hewitt: Health Price Pressure Mounts on ThinkAdvisor.

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