CareConnect, the upstart insurance company founded in 2014 by Northwell Health in the Downstate New York marketplace, has made the decision to cease operations. It made a lot of sense that Northwell, a hospital chain with extensive provider connections, could cut out the middleman insurance company and offer insurance protection directly to its customers. It didn’t work. For the first six months of 2017, Northwell reported a loss of $59 million; an increase of $11 million in loss over the same period in 2016. In its communication to the public, they cited potential cuts to the federal Medicaid and 340B drug program, and changes to the Affordable Care Act as other reasons for pulling the plug on its insurance program.
This shows just how difficult it is to manage health risk. In the aftermath of the collapse of Health Republic, New York State – which had previously put immense pressure on insurers to lower rates – eased up and allowed significant 2017 rate changes. But despite the premium relief, CareConnect could not reverse its losses. The good news is that, unlike Health Republic, the wind down of CareConnect will be well-managed and patients and providers won’t be left wondering if claims will be paid.
This failure is another blow to the insurance exchanges, which are seeing an exodus of insurers. It was no surprise to me that established insurers would abandon the individual and small group markets rather than sell insurance for less than the cost of underlying care. The competition – which was supposed to be the cornerstone of the “Affordable” in the Affordable Care Act – plain and simply isn’t working.
The collapse of CareConnect puts the spotlight on Oscar, another New York area startup which has shown nothing but red ink to its well-connected investors. Oscar claims to have a better model by taking the friction out of healthcare access. To me it seems that they are just trying to attract younger, healthier and more tech-savvy members. But in the end claims are claims and I am not sure they have the market clout, underwriting capabilities or financial wherewithal to survive in this complex market.
There are no easy answers to lowering healthcare costs – but that is where healthcare reform has to start.