New Hyde Park-based Northwell Direct aims to grow health benefits branch

Northwell is focused on expanding a subsidiary that sells medical benefits to big names like Whole Foods Market and the New York Islanders. 

The New Hyde Park-based health system hopes to grow Northwell Direct, which offers benefit packages to employers with self-funded health plans. Northwell Direct currently has contracts with 33 employers — from Uncle Giuseppe's Marketplace to a union benefits fund — that collectively cover about 30,000 people, CEO Nick Stefanizzi said. That excludes about 85,000 members who are part of Northwell Direct because they or a relative work for Northwell Health, the state's largest health and hospital network. 

Since launching in 2020, Northwell Direct has become “a top growth priority” for the health system, which hopes to add at least 10,000 members annually, Stefanizzi said.

“Our network team is out every day talking with provider organizations to expand the geographic footprint and thereby allow us to talk to a broader group of employers,” he said.

In some ways, Northwell Direct is an iteration of CareConnect, an insurance subsidiary that Northwell Health shut in 2018. The health system wanted to help employers struggling to provide quality health care, but it didn't want to invest in the infrastructure and capital reserves required of licensed insurers, Stefanizzi said. That's why it focused on companies with self-funded health plans.

These employers have insurers organize a network of health providers and pay the medical claims that are generated as workers use this network. The employers bear the financial risk if bills skyrocket. Many blunt this threat by buying stop-loss insurance, which kicks in if claims surpass a certain threshold.

By contrast, traditional insurance plans charge employers a set monthly premium and then assume the risk of paying for workers' care.

Northwell Direct isn't licensed to sell insurance, but vetted its model with state regulators, Stefanizzi said.

Nearly 83% of Long Islanders who receive insurance through an employer are on plans that businesses self-fund, according to estimates from Mark Farrah Associates, an industry analytics firm. 

Stefanizzi declined to provide cost estimates for Northwell Direct, but said employers pay standard rates for its service and third-party administrators who handle claims. But he said employers save because their workers can use clinicians who discount their rates.

Most Northwell Direct customers offer workers two tiers of providers. The first consists of Northwell and other clinicians,150 urgent care centers and 55 hospitals throughout New Jersey, Connecticut and the Hudson Valley. These are quality partners who agreed to charge about 20% less to Northwell Direct members, Stefanizzi said. Employers often incentivize use of this tier with cheaper copays.

The second tier is typically provided by a larger insurer like Anthem or Aetna, Stefanizzi said. This prevents workers from having to switch providers and ensures they can get care while traveling. 

 Northwell Direct's care management services and ability to tailor its offerings appealed to The Cerebral Palsy Association of Nassau County, a social service agency commonly referred to as CP Nassau. 

“We’re not necessarily looking to save money on health insurance as much as to have a healthier workforce, and in so doing, hopefully reduce our health care costs,” said human resources director Larry Davies.

CP Nassau's health costs were slated to rise 23% if it renewed its traditional policy in late 2022, according to chief financial officer Gordon Siess. With Northwell Direct, they went up about 8%, he said.

Earlier this year, therapists and other clinicians complained of billing problems when Northwell Direct switched its third-party administrator. Expanding the service further will be challenging and could pose risks to the health system's main line of business, said Debra Donahue, senior director of market analytics and online products at Mark Farrah Associates.

  Other insurance providers will see the discounts given to Northwell Direct in mandated price transparency reports and demand lower rates, Donahue said. Public price transparency reports are thought to have played a role in Mount Sinai Health System and UnitedHealthcare cutting ties for weeks in the middle of a contract.

“The other insurance companies in the area are going to ask for that same rate, or they'll take [Northwell] out of their network altogether,” Donahue said. “They'll lose more than they will gain.”

Stefanizzi said his responsibility is to focus on Northwell Direct, not the larger health system. 

Northwell Health said it doesn't see the model as a threat, but “as an opportunity for other insurers to adopt this new model,” said spokesman Joseph Kemp.

By Sarina Trangle

sarina.trangle@newsday.com@SarinaTrangle

Sarina Trangle covers affordability and cost of living issues and other business topics. She previously worked as an editor and reporter at amNewYork.