Michael Conway

DENVER — Colorado Department of Insurance director Michael Conway and his staff have drafted legislation to protect consumers if their health insurance company becomes insolvent. The legislation will also cover other insurers from possible financial losses that they may incur from another insurance company that they are exposed to.

In an interview with Valley Courier regarding the legislation, Conway started with this regarding Friday Health Plans Inc. The state of Texas has liquidated that license, and the state of Oklahoma has taken action against its license. We’re concerned about these issues, and we’ll be very close to Friday. [Health Plans Inc.] We remain close to them, so we’re up to date on their financial situation, and we continue to have ongoing conversations with them. We are also taking steps to make sure we have as much protection as possible in the market if things go wrong here.”

In early March, health insurance plans on Friday notified 98 employees that they would be laid off within 60 days, according to documents the company provided to the Colorado Department of Labor and Employment and internal documents obtained by Valley Courier. In November of last year, the company laid off 55 employees at Alamosa.

It’s difficult to estimate the total number of employees remaining at Friday Health or the number of employees at Alamosa. The company declined to comment.

In late March, the Texas Division of Insurance seized Friday Health’s assets there and began liquidating them.

On April 5, Oklahoma Insurance Commissioner Glenn Mulready announced that he had put in place Friday Health Plans of Oklahoma, Inc. (Friday Health) is under the supervision of the Oklahoma Insurance Department (OID). Friday Health is the only licensed health maintenance organization based in Oklahoma.

At the time, Oklahoma Commissioner Mulready stated: “The decision to place Friday Health under supervision was not made lightly. However, given the company’s financial condition, we determined it was the best course of action to protect policyholders and ensure their claims are paid.”

In Colorado, the Life and Health Assurance Association steps in and pays claims if the insurance company fails, the insurance company goes into liquidation, and the Assurance Association steps in and pays out claims that the failing insurer doesn’t have the ability to pay,” according to Conway, health maintenance organizations are not currently covered in Colorado by the Warranty Association, Conway added, “It’s John’s problem, that we don’t have an HMO in our Warranty Association, that if one of them fails, we’ll have hospitals and providers who don’t get paid.” We have a fair concern, if not a great deal of concern that hospitals or service providers could fail.”

Conway said the department is introducing legislation to address this in a bill that will be introduced by State Representative Kyle Brown, who sits on the Health and Insurance Committee.

According to Conway, “The legislation would include the guarantee society’s HMOs, should the worst happen, and Friday [Health Plans] unable to do so. As we sit here now, Friday Health, from what we can see in their financial condition, Friday Health, the Colorado-licensed company, is well capitalized.

“We’re concerned if Friday and Bright don’t succeed and go into bankruptcy and/or Friday fails and goes into bankruptcy this year, we’re concerned that they won’t be able to make risk settlement payments in Colorado, and if they don’t make risk settlement payments,” Conway added. We are concerned that this may actually lead to the failure of other insurance companies.

The scenario the state wants to avoid is the cascading effect that the failure of one insurance company would have on others and to protect consumers’ health insurance coverage.

Vince Blemell of The Department provided this description of these payments,

“Risk adjustment payments are payments from insurers that end up with the lowest-risk enrollees (therefore, the healthiest people) that are made to plans with the highest-risk enrollees (the sickest people). They spread the financial risk across the companies.”

According to Conway, the proposed legislation would allow funds from the insolvent company to be used for other insurers to cover risk settlement repayment obligations and keep them solvent.

“We’re concerned that some companies or companies that have fairly large risk settlement receivables if they don’t get paid, and if Bright and Friday fails, it could ruin other insurers as well, and then, John, we’re worried about and we’re trying to stop This legislation is a cascading effect of insurance companies failing, causing a potential provider to fail as well.”

The Valley Courier gave Friday Health Plans CEO Beth Bierbower the opportunity to comment for this article, and on her behalf, Columbia Clancy replied, “We respectfully decline the opportunity.”

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