Michael Dowling, president and chief executive of Northwell Health.

Michael Dowling, president and chief executive of Northwell Health. Credit: Newsday / John Paraskevas

CareConnect, the insurance subsidiary of New Hyde Park-based Northwell Health, said Thursday it would shut down, and thus withdraw from the state insurance market in 2018.

CareConnect said its 126,000 policyholders — including individuals, and small- and large-group accounts — would remain covered while they transfer to new health providers.

“Each policy will transfer depending on when the policy expires,” said Terry Lynam, a spokesman at Northwell Health.

About 56 percent of CareConnect policyholders are Long Island residents, the company said.

The East Hills-based insurer said it was closing, in part, because of the uncertainty of the Affordable Care Act’s future.

Northwell also pointed to the $112 million that CareConnect paid into the ACA’s risk-adjustment pool this year under the rules governing the insurance exchange. Northwell said the payment kept CareConnect from being profitable. The $112 million represented 44 percent of CareConnect’s 2016 revenue from its small group health plan.

“Everyone agrees that the formula is flawed, but no one is willing to change it,” Michael J. Dowling, president and chief executive of Northwell Health, said in an interview. “I could not take these losses without a light at the end of the tunnel.”

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CareConnect would be facing another risk-adjustment payment of more than $100 million next year from its 2017 small-group revenue. CareConnect’s small group health plans are for businesses with 100 or fewer employees.

Northwell’s decision to end CareConnect underscores uncertainty and instability in the health insurance marketplace, experts said.

“It is critical that the federal government maintain a stable and predictable regulatory climate for the marketplaces and make necessary policy adjustments to ensure that consumers who rely on the marketplaces can maintain their coverage next year,” said Sara R. Collins, a vice president at the Commonwealth Fund, a private foundation in Manhattan that supports independent research on health care issues.

Other insurers could also withdraw from Affordable Care Act state marketplaces because of uncertainty, said Elaine L. Smith, acting dean of the College of Nursing and Public Health at Adelphi University in Garden City.

“I think every company that provides health care coverage will take a candid and intense look at its business,” Smith said.

Changes in the risk-adjustment pool formula are coming to address concerns expressed by some insurers, said Gary Claxton, a vice president at the Kaiser Family Foundation, a non profit that focuses on health care policy.

“It’s an issue,” he said. “There are certainly insurers who think that it is difficult to predict always how much you are going to have to pay in.”

He added, “That doesn’t mean that the formula is faulty, it means they didn’t anticipate correctly.”

CareConnect also said it never received $150 million from the federal government in risk-corridor payments, which were intended to cover losses incurred by insurers during the Affordable Care Act’s first three years, when rates were intentionally kept lower.

“There was a desire to keep rates low in the early years of the ACA to encourage people to sign up,” Lynam said. “In exchange, the federal government promised it would help offset those losses. But then they refused to pay.”

Northwell has joined a class action suit to force the federal government to pay.

Northwell said that many of CareConnect’s more than 200 employees will continue to have jobs during the transition period. Northwell added that it would assist the employees in trying to find other suitable positions within the health system.

CareConnect was created in 2013 as the state’s first commercial insurance company owned by a health system.

There are 14 insurers in the New York individual market, and 19 in the small group market, in 2017.

CareConnect has 9.1 percent of the individual market and and 7.3 percent of the small group market this year in New York, according to data from the state’s Department of Financial Services.

“In spite of recent federal efforts to destabilize markets and threats to dismantle or not enforce the ACA, New York’s health care market remains robust and consumers across New York have real choice of coverage,” said Maria T. Vullo, superintendent of the department. “DFS will work with CareConnect on an orderly transition to ensure that all of its members know their full options and continue to receive health care coverage without interruption.”

Northwell Health has about 62,000 employees in New York, where it operates 21 hospitals. It has $11 billion in annual revenue.

Health insurer: CareConnect

Headquarters: East Hills

Parent: Northwell Health

Policyholders: 126,000

Employees: 200

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