A New York hospital system has shut down its Obamacare insurance company because of major financial losses.
Northwell Health announced Thursday it will withdraw its insurer branch, CareConnect, from New York's individual insurance market. The company cited a huge bill from the federal government and uncertainty in Washington over Obamacare's future as primary factors for the withdrawal.
CareConnect is the latest insurer to withdraw from Obamacare because of a mix of poor profitability and uncertainty over whether Congress or President Trump will make Obamacare payments to insurers. Of the 126,000 CareConnect customers, about 13,000 are on the exchange and the rest are off the exchange.
New York's insurance regulator is reviewing the company's withdrawal plan. Until it is approved, CareConnect must accept new members, a company representative said.
Earlier this year, more than 40 primarily rural counties did not have any Obamacare insurer. While the last of these bare Obamacare counties were filled Thursday, the Department of Health and Human Services noted that 38 percent fewer insurers have applied to offer plans in 2018 compared to 2017.
In Northwell's case, a major reason for the departure was payments the insurer had to make under Obamacare's risk adjustment program.
The program requires insurers with healthier customers to give money to insurers with sicker customers.
CareConnect was expected to be profitable this year, if not for a $112 risk adjustment payment to the federal government. The company would have faced another payment of more than $100 million next year, it said.
"Defects in the small-group program have resulted in New York's smaller, more-innovative insurers like CareConnect to subsidize larger competitors, which have more in-depth medical histories on their customers than start-ups that have been in business for less than four years," the company said.
Other insurers have faced similar problems with the risk adjustment payments, leading to the Obama administration to try to tweak the formula for 2017.
Another problem was a lack of payments for risk corridors. Under the risk corridor program, plans with profits pay the federal government and the government reimburses plans with higher-than-expected losses. But not enough Obamacare insurers were profitable, leaving not enough money to pay insurers for their losses.
Northwell President Michael Dowling added in a statement that "uncertainty in Washington about the future of the [Affordable Care Act]" and the other factors led to "no viable path to profitability in the foreseeable future."
The Trump administration has not committed to making Obamacare's cost-sharing reduction payments that reimburse insurers for lowering out-of-pocket costs to low-income customers. The Republican-controlled Senate failed to repeal Obamacare after a narrow defeat last month.