It can be both scary and surprising if your health insurance plan suddenly announces that it is closing down or your state takes over your HMO because of solvency problems.

When a health plan can't plan its claims, it is rendered insolvent. The state in which the health insurer operates then has two choices. Under liquidation, the insurer goes out of business and its assets are sold off. If there's not enough money to pay claims, the state taps its "guaranty fund," which is intended for just such purposes. Or, the state could choose rehabilitation. Under this scenario, the insurer and the state work out a financial plan for the insurer to pay claims and stay in business.

If your health insurer goes under, its fate is decided by state insurance regulators. And those decisions affect your fate, too. If your plan is liquidated, the state may arrange to transfer all policies to a different insurer in order to maintain your coverage. If your insurer is rehabilitated, you should, in practice, experience no difference in service or claims.

For example, in Florida, SunCoast Physicians Health Plan Inc. went under and was liquidated by the state in August 2007. SunCoast was a Medicare HMO that served about 700 customers. Their coverage ended at exactly 12:01 a.m. on Aug. 11. The Centers for Medicare and Medicaid Services arranged for Humana Medical Plan to provide continued coverage to plan members and Humana mailed letters to each subscriber explaining how the continued health care coverage would work and the subscribers' other Medicare options.

Occasionally, a health plan will go under because regulators discover it is operating without a license. For example, in May 2002, Texas issued an emergency cease and desist order against the National Guild of Medical Professionals Health and Welfare Benefit Trust Plan, which allegedly owed more than $4 million in unpaid claims. Texas also shut down Solidarity Health Plan, which had been created and operated by some of the same parties and had accepted some of the old plan enrollees.

If you get word that your health plan is going belly-up, don't panic. Contact your state insurance department to find out what its plans are.