SALT LAKE CITY — The Utah Insurance Department wants several insurers to help cover millions in unpaid medical claims resulting from Arches Health Plan going out of business, but those carriers are pushing back in court.
Arches announced in October 2015 that it would no longer offer insurance on the federal health exchange beginning the following year, citing an extreme shortfall in expected financial help from the Affordable Care Act's risk corridor, a mechanism in the law intended to shore up some insurer's losses. The health co-op was insuring about 45,000 Utahns on the exchange at the time.
On Feb. 2, state insurance regulators filed a motion with the 3rd District Court requesting that seven insurers help pay $26.6 million in unpaid Arches claims.
The Utah Insurance Department cited a portion of Utah law stating an organization that manages the assets of a defunct insurer "may require all solvent health maintenance organizations to pay for covered claims incurred by the enrollees of the insolvent (carrier)."
Utah law indicates those insurers should be required to pay for unmet claims proportionate to their earnings from premiums in the year prior, the department argues in its motion.
Based on that argument, the department is seeking to require that SelectHealth pay 57.75 percent of the outstanding $26.6 million in Arches' unpaid claims. It also wants Aetna to pay 15.72 percent, United Healthcare 11.95 percent, and Molina Healthcare of Utah 11.18 percent.
Humana would pay 2.65 percent, Health Choice of Utah would pay 0.48 percent and Bridgespan Health would pay 0.27 percent, if the department's motion is approved.
However, three of the affected insurers filed opposing motions March 15, saying they bear no such financial responsibility.
Molina's motion argues that the "central purpose" of the section of Utah code cited by the insurance department is simply to ensure the customers of the defunct insurer are "not ... left without coverage" by temporarily transferring responsibility for those customers to other insurers.
"In this case, the liquidator did not protect Arches enrollees by assigning them to other (insurers. Instead, they were left) to fend for themselves in finding replacement coverage," Molina's court filing states.
"It is therefore ironic that the liquidator now seeks to use the 'continuation of coverage' statute to obtain $26.6 million to pay providers and that the money would not benefit enrollees."
Molina's motion also says the "very large amount being sought" by the agency likely indicates it is requesting payments for unpaid Arches claims outside of the time frame allowed under state law.
A motion filed by United Healthcare makes a similar argument, saying "the liquidator is attempting to transform an assessment provision designed to support a limited form of continued coverage for (affected) enrollees ... into a sweeping guaranty in favor of health care providers."
SelectHealth's motion opposing the department's request says it was made based on a portion of state law that is unconstitutionally vague in the power it grants to the agency.
"The absence of such standards and procedural protections (for insurers) is particularly striking in the context of a nonparty being asked to pay millions to fund an insolvent organization's debts, and contrasts with other laws affording such protections," SelectHealth's motion states.
The Utah Insurance Department told lawmakers in August 2017 that it would be able pay out about $10 million from the Arches estate by the end of the calendar year in an effort to reimburse health care providers, but that such payments would make up only a fraction of the more than $36 million owed.
Another $10 million in liquidated Arches assets would need to be held in reserve in order to pay for future court costs related to the insolvency of the co-op, the agency said at the time.1 comment on this story
Tanji Northrup, assistant commissioner of the department, also said last year that Arches was $90 million in debt to the federal government and owed another $2 million in payments for advertising and the services of insurance agents.
However, the department was hopeful that the Arches estate could receive about $57 million from an ongoing class action lawsuit against the federal government seeking belated payments from the Affordable Care Act's risk corridor program, Northrup said in August. By law, any paying off of Arches' debts must make health care providers whole before reimbursing the federal government.