The decision by Northwell Health to shut down its wholly-owned insurance subsidiary CareConnect next year leaves about 126,000 New Yorkers in search of new health insurance coverage.
The shutdown affects many hundreds of local businesses and individuals who signed up for Care Connect after the nonprofit health insurance cooperative Health Republic was ordered shut down by state regulators in September 2015. That shutdown left more than 215,000 New Yorkers, including 44,000 in Suffolk County, suddenly without health care coverage.
CareConnect, owned by the North Shore-LIJ health system — which has since changed its name to Northwell Health — was one of just four health plans available in the small group market in the state. It offered plans and premiums comparable to Health Republic, but a network limited to hospitals and providers owned by the hospital system and those hand-picked by the insurer for inclusion in what its officials described as an intentionally narrow network aimed at controlling quality — and costs.
The merger of Peconic Bay Medical Center into the North Shore-LIJ system was an impetus for North Fork residents left in the lurch by the Health Republic shutdown to sign up with CareConnect.
Thursday’s announcement by Northwell Health that CareConnect will withdraw from the New York market in 2018 has small business owners and individuals wondering what will happen now.
“It’s not going to be like Health Republic,” said Karl Washwick of the Washwick Agency in Riverhead, which writes health insurance policies for small businesses and individuals. “That was a hard shutdown. This will be an orderly shutdown,” he said.
“There’s no cause to panic.”
He said there was no word yet on whether current CareConnect subscribers would be welcome to enroll again during this year’s open enrollment period, which begins November 1.
Randal Morreale of Neefus Stype Insurance in Aquebogue said his agency is awaiting guidance from the insurance company. “But I will not recommend submitting new businss to them after December 1.
Health care providers “got shafted” in the Health Republic shutdown, Washwick said — left with unpaid claims or offers to settle for pennies on the dollar, despite assurances by state regulators and elected officials that their claims would be honored. Providers were prohibited by law from trying to collect directly from Health Republic subscribers.
Washwick said he does not foresee anything like that reoccurring with CareConnect, which he said was “priced and administered correctly — unlike Health Republic, which was founded on a fallacy.”
CareConnect, established in 2013, touted itself as a patient-centered carrier that focused on efficiency and quality.
Northwell Health, in a statement issued Thursday, said it was shutting down the insurance company because of hundreds of millions of dollars in risk adjustment payments it was required to make by the Affordable Care Act. The law requires companies with a healthier subscriber pool to basically transfer a share of their revenues to insurers with statistically sicker clients. The idea was to prevent newer companies from “cherry-picking” healthier — and therefore less costly — subscribers. CareConnect was required to contribute $112 million in risk adjustment payments this year, the company said last week.
At the same time, Congress amended the Affordable Care Act to cut “risk corridor” payments to new insurers in the ACA marketplace. The new insurers lacked enough data hitory on its clients to determine correct premiums and the risk corridor payments, which were supposed to have been made during the ACA’s first three years, were intended to provide a smooth launch for the marketplace companies while they collected enough experience data on subscribers to set correct premiums.
But Congressional Republicans opposed to the ACA refused to fund the risk corridor payments. That refusal was a fatal blow to new companies offering insurance on the ACA exchange, including Health Republic. Insurers claiming they are owed more than $8 billion in payments from the federal government have filed more than two dozen lawsuits seeking payment. Health Republic is among the litigants, which in February 2016 filed a class action lawsuit against the United States in the U.S. Court of Claims. The court split decisions in two other lawsuits decided so far: it denied one companies claim for $70 million but granted another’s for $200 million.
CareConnect would have receive $150 million in risk corridor payments during its first three years.
The required risk adjustment payments combined with the denial of risk corridor payments for a one-two punch that CareConnect said made its continuation unsustainable.
Washwick said his “best guess” is about 20 percent of small business and individual subscribers locally are enrolled in CareConnect.
“Most of the former Health Republic refugees went to other plans,” he said.
There are currently six alternatives available in the small group market: Anthem-Blue Cross, Emblem, Health First, Oscar, Oxford and Aetna, according to the agents. Oxford and Aetna are significantly more expensive than the rest, but have the largest networks, Washwick said. Oscar has no network locally, he said, and is not really a viable option.
“You live and die by the network,” Morreale said. “Really, when you enroll in health care coverage, you’re buying a network.”
Individuals seeking coverage can buy it through an agent or on the exchange. Customers buying through an agent will pay fees to the agent and won’t receive income-based premium subsidies, which are available only through the exchange.
How many and which companies will be offering insurance on the exchange for the coming year will vary from state to state. Washwick predicted Medicaid carriers in New York, which expanded Medicaid under the ACA, may be the only companies offering insurance through the exchange.
“It’s very hard to make money in the exchange marketplace,” he said. That’s true for agents as well as carriers. Nearly all agents have stopped writing exchange plans, because commissions are so low it’s not worth their time and effort. That means individuals who qualify for a premium subsidy are left on their own to negotiate the complicated landscape.
