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Citing financial losses wrought by inaction and uncertainty in Washington, New York State’s biggest hospital system is shuttering its four-year-old health insurance division that sold coverage, some of it via Obamacare.
The division, CareConnect Insurance Co., insures 126,000 New Yorkers who will have to purchase coverage elsewhere when the hospital system, Northwell Health, phases out its insurance operation next year.
In a statement, Michael J. Dowling, the chief executive officer and president of Northwell, said CareConnect had been unable to turn a profit, and in fact had seen considerable financial losses.
“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,” he said.
About 13 percent of CareConnect’s customers purchased insurance through Obamacare’s public insurance exchanges. The vast majority are small businesses plans, which can carry their own set of financial demands, complicated by changes to the initial tenets of the Affordable Care Act in Washington over the past few years.
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Two factors played into the decision to cease insurance operations, according to a spokesman, Terence Lynam. One was a component of the Affordable Care Act designed to prevent small, newer insurance companies from cherry-picking healthy clients. Known as “risk adjustment,” it requires companies with a healthier client pool to essentially transfer money to insurers with statistically sicker populations.
Risk adjustment required CareConnect to contribute $112 million in 2016, according to the company, resulting in a 44-percent dent in revenue from health plans for businesses with fewer than 100 employees. For 2017, the prospective payout would have been more than $100 million, Northwell said.
The second factor, according to Northwell, was the financial blow it sustained when Congress changed an initial facet of the Affordable Care act last year.
Originally, the act called for the reimbursement of companies that lowered plan prices to entice sign-up during the first three years of the health care law’s rollout, among other things.
But a successful push by congressional Republicans, including Senator Marco Rubio of Florida, who called the payments a “a taxpayer-funded bailout for insurance companies,” led to a new law that sharply reduced the reimbursements. CareConnect had expected to receive $150 million for the first three years of its operation.
“Washington has to retake a look at what it needs to do to stabilize the insurance market nationwide,” Mr. Dowling said in an interview.
“At the moment it doesn’t seem like they are interested in doing anything,” he added, his voice rising. “Politics is so poisonous at the moment that nobody wants to sit down collectively and, in my view, do their duty to fix the things that need to get fixed.”
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