Cautionary tales: Why some payer-provider initiatives have stumbled
Two unsuccessful provider-sponsored health plans (PSHPs), CareConnect in New York and HealthSpan in Ohio, underscore the challenges of adopting such a go-it-alone strategy.
CareConnect. This PSHP was launched in 2016 in the individual and small group market by Northwell Health in Long Island, New York, an early adopter of population health strategies. After having to pay $11.2 million into the ACA Health Insurance Exchange Risk Pool (44% of its 2016 small group revenue) and then losing $36.2 million in operations in Q1 of 2018, CareConnect faced an additional $100 million ACA payment in 2018 on its 2017 revenue. The plan was deemed “financially unsustainable” and withdrew from the market. In assessing lessons learned, observers concluded that, despite significant enrollment of 125,000 members, CareConnect had underpriced commercial products for the small group market because it lacked the data-base and actuarial experience of established competitors such as UnitedHealthcare and Oxford Health plans.a CareConnect also did not follow the lead of many PSHPs by enrolling health system employees in the new health plan, leaving its 68,000 employees in a self-funded plan administered by UnitedHealthcare.
HealthSpan. Mercy Health in Cincinnati acquired Kaiser Permanente’s Health Plan in Ohio in 2013 to make it the centerpiece of its new insurance arm, HealthSpan, which would offer Medicare Advantage, small group and individual plans. But after the acquisition, HealthSpan lost thousands of members across all markets when it dropped the Kaiser brand. Per-member-per-month costs ballooned and ACA exchange risk-adjustment obligations destroyed the bottom line. HealthSpan lost $30 million in 2014, and $116 million in 2015. As a result, Mercy decided in 2016 to dismantle the PSHP, shedding its 200 employed physician group, selling its insurance operations to Medical Mutual and exiting the Ohio Health Insurance Exchange in 2017. Mercy appears to have underestimated the difficulty in expanding the closed-staff Kaiser model, which already was losing money before the acquisition, while simultaneously launching Health Innovation Ohio, a statewide value-based contracting alliance that could have served as a provider network for HealthSpan.
a. In launching CareConnect, Northwell concluded that the safer Medicare Advantage (MA) market was too crowded to enter. However, out of 227,000 seniors in Nassau county, CareConnect’s home market, only 25.6% in 2015 were enrolled in an AM plan, which is not a high penetration rate.