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.
| If your health insurer goes under, its fate is decided by state insurance regulators. |
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.
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