Northwell Health to shut down insurance arm

New Hyde Park, N.Y.-based Northwell Health will wind down is health insurance business, CareConnect, over the next year, according to Bloomberg.

"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," Michael J. Dowling, Northwell's president and CEO, told Bloomberg.

Northwell's insurance unit has suffered financial losses and Mr. Dowling said there isn't a path to profitability for the business in the near term.

Northwell ended the first quarter of fiscal year 2017 with an operating loss of $36.2 million, compared to an operating gain of $29.4 million in the same quarter of fiscal year 2016. The financial downturn was largely attributable to CareConnect's losses, which totaled $22.7 million.

In the first quarter, CareConnect took a hit from the ACA's risk adjustment program, which is intended to reinforce market rules that prohibit risk selection by insurers. Under the program, funds are transferred from plans with lower-risk enrollees to plans with higher-risk enrollees. CareConnect's risk adjustment liability was $29.4 million in the first quarter of fiscal year 2017, compared to $8 million in the same period of the year prior. Northwell said CareConnect would have posted a profit this year if it hadn't been required to pay into the risk adjustment program, according to Bloomberg.

In a first quarter earnings statement released in June, Northwell officials said they believe operating insurance companies "is an effective strategy to manage population health." However, they stated "management would reconsider continued participation in specific insurance products, if their long term financial sustainability cannot be reasonably assured."

As of June 30, CareConnect had 118,086 members, which include those enrolled in small business plans, large group coverage and the ACA's individual market.

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