Care Connect – Winding Down Operations

Information is circulating this morning that Care Connect, a New York health insurer, has filed with New York State to cease operations due to the Risk Adjustment Program

What is the Risk Adjustment Program and how did it severely affect Care Connect’s operations?

The risk adjustment program was designed with good intentions.  Unfortunately, as we often see, good intentions do not always translate into good policy. The risk adjustment program was designed to prevent insurance carriers from creating an adverse selection by targeting only the healthiest populations.  In an effort to stabilize any possible adverse selection, the Centers for Medicare and Medicaid formulated a scoring system based on enrollee demographics and medical diagnoses.

Those carriers with a low score – meaning they have a healthier than average population pays those with a higher score.  The problem is that larger, more experienced insurers have been more skilled at complex reporting requirements of the risk adjustment program and more adept at presenting data to serve their own needs.  As a result, smaller carriers like Care Connect have had to pay out substantial sums ultimately destabilizing their own pools. Fortunately, Care Connect is backed by Northwell health and the wind-down is expected to be gradual unlike when Health Republic exited the market in 2015.

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