Jeffrey D. Allred, Deseret News
FILE - The Utah Insurance Department told legislators that it will pay roughly $10 million to health providers over the next six months to help pay down the debt of unpaid claims from Arches Health Plan, which closed its doors at the end of 2015.

SALT LAKE CITY — The Utah Insurance Department has told legislators that it will pay roughly $10 million to health providers over the next six months to help pay down the debt of unpaid claims from Arches Health Plan, which closed its doors at the end of 2015.

But Tanji Northrup, assistant department commissioner, said that the payments are just a fraction of the more than $36 million owed to those service providers by the health co-op, which was founded for the purpose of offering insurance plans on the federal exchange established by the Affordable Care Act.

That number could still rise as a small number of straggler claims trickle in, she said.

That's in addition to another $90 million that the defunct co-op owed the federal government, as well as $2 million in unpaid debts to insurance agents and unpaid advertising costs, Northrup reported to the Health Reform Task Force of the Utah Legislature last week.

The money owed to the federal government was a startup loan of $10 million and a solvency loan of $80 million.

Arches announced in October 2015 that it would no longer be able to offer health insurance beginning in January 2016. The announcement meant 45,000 Utahns would no longer be covered beginning that January and would need to explore other options for their health insurance.

Arches at the time cited unsustainable financial pressure caused by an extreme shortfall in expected funding from the Affordable Care Act's risk corridor, a funding source that the law intended to use to make up for unpredictable shortfalls for some insurers.

At the time Arches was put into receivership, it was paying $2 million per month to outside third-party administrators for help processing claims, Northrup reported. That number dismayed task force co-chairman Rep. Jim Dunnigan, R-Taylorsville, who asked incredulously, "How do you get that job?"

"Well, when you have an insurance company that doesn't have the expertise or the technology to pay claims," Northrup began, before cutting herself off.

Since the time that the Utah Insurance Department hired Stillman Consulting Services to take Arches into receivership, the firm has "been able to reduce that to just a few hundred dollars a month," she said.

Former Arches CEO Shaun Greene told the Deseret News that he "wholeheartedly, respectfully" disagrees that Arches was paying anywhere close to $2 million per month for those services. He added that the contract in question "was pretty favorable" and that he is not confident Insurance Department leaders were "given all the facts."

In an interview with the Deseret News last year, Greene was critical of the Insurance Department's decision to shut down the startup insurer.

Greene said at the time that the company was able to present an analysis to the department providing evidence that the co-op could manage a small profit by the end of 2016.

Insurance Department Commissioner Todd Kiser told health providers in a public meeting earlier this month that the decision to take Arches into receivership was based on objective data and "wasn't a subjective opinion that we (expressed) to say 'we want to do this.'"

In all, what remains of what used to be Arches is $20 million in assets. Dunnigan asked why $10 million of that is not scheduled to be paid out to health providers in the coming months.

"Why can't we pay more? Why don't we expend the (full) $20 million and pay those claims?" he said.

That money is being held in reserve for "any potential future claims or future litigation that may occur and the administrative costs to finalize this insolvency, which is going to take years," Northrup said.

Greene also said Sunday that he was dissatisfied with the pace of the payments being made to service providers.

"They could have made a partial payment a long time ago," he said.

Sen. Allen Christensen, R-North Ogden and co-chairman of the task force, asked Northrup whether there is "such a thing as negotiating with the providers on a pay down amount."

Northrup said Kiser is allowed by law to "take a reduction of 25 percent and pay the provider claims 75 cents on the dollar."

"Commissioner Kiser has not yet made a determination on if he is going to (do that) or not," she said.

Steve Gooch, spokesman for the Utah Insurance Department, told the Deseret News that compensation to health providers for unpaid claims will be ordered by date of service, with earlier medical services being paid for first, and that no one provider or one type of claim is otherwise prioritized over another.

Gooch said Utahns who had Arches insurance don't need to be concerned that their health providers would pass financial responsibility for any unpaid insurance claims back to them. Such action would be illegal, he said.

"There's nothing they have to worry about this point," he said of those who were covered by Arches.

Northrup said her department is maintaining hope that all health providers can be paid in full, but that could be contingent on the success of a class action lawsuit against the federal government suing for funds from the Affordable Care Act's risk corridor mechanism. The receivership could receive roughly $57 million if the lawsuit is successful, according to the department.

"It's going to be a long process, but I would say there is a light at the end of the tunnel," she said, saying that three of six similar lawsuits against the federal government have so far found favorable rulings.

"I'm not optimistic that will happen," Rep. Dean Sanpei, R-Provo, said, referring to a court victory resulting in a payout.

When asked about the lawsuit, Greene said he was cautiously hopeful it could eventually get the job done and said he agreed with the effort.

"We have seen some succesful judgements, so why not?" he said, but also warned that winning in court and getting paid in full "are two different things."

Kiser explained to health providers in a meeting earlier this month that federal authorities have appealed in all three risk corridor cases they lost. He also cautioned "it might be years" before a final judgment is given in the lawsuit that could potentially benefit them.

Statutorily, any paying off of Arches' debts would be required to make health providers whole before beginning to recompensate the federal government, Northrup told the Deseret News.

A somewhat obscure provision added to extensive federal spending legislation in 2014 delivered a major financial obstacle to Arches and co-ops like it around the country by limiting the capabilities of the Affordable Care Act's risk corridor feature.

Despite receiving assurances from the Centers for Medicare and Medicaid services just months earlier that risk corridor payments would be delivered in full, Arches discovered in October 2015 that it would receive only $1.9 million out of an expected $11 million in such funds.