An Illinois-based HMO facing bankruptcy proceedings will stop conducting business in Arkansas on March 31, according to Arkansas regulators.

The move, announced March 22, comes a month after Illinois insurance regulators said they want to liquidate American Health Care Providers Inc. (AHCP), based in Richton Park, Ill. AHCP is the parent company of American HMO, which will cease providing coverage for about 300 Arkansas residents at the end of March.

If a judge allows a petition to liquidate AHCP, 90,000 customers — including those in Arkansas — would be forced into a new health plan.

Arkansas Insurance Commissioner Mike Pickens says American HMO/American Health Care Providers and the Insurance Department reached an agreement which provides for the company to stop conducting business in the state. According to Arkansas law, new health insurance will be available to AHCP's customers.

"Suspending the HMO's license to do business in Arkansas will help both consumers and medical care providers," Pickens says in a prepared statement. The Consumer Services Division has notified those involved with AHCP.

On Feb. 15, the Illinois Department of Insurance filed a petition to liquidate AHCP, the state's seventh largest HMO. According to Illinois regulators, the HMO has $25 million in liabilities, which outweigh its assets and make it insolvent.

The matter is still pending in Circuit Court of Cook County, says Richard Darling, a spokesperson for the Illinois insurance department. The state alleges AHCP has failed to pay doctors and hospitals millions of dollars in bills while running in the red.

The state filed its petition to declare the HMO insolvent after investigating the company's finances for six months. Darling says the company also was a target of complaints from customers who said their claims were not being paid on time.

AHCP follows a path taken by several other beleaguered HMOs. Darling says 11 HMOs in Illinois have been liquidated over the past 18 years. "This is becoming an increasingly common problem throughout the country,'' he explains.

Darling says a variety of conditions spur problems for HMOs like AHCP. They include the rising cost of health care, poor management, and a lack of control of records, to name a few.

Officials at AHCP could not be reached for comment, but in an interview with the Chicago Tribune, Asif Sayeed, AHCP founder and chief executive, denies the state's allegations. The HMO intends to fight the liquidation at the court hearing, the newspaper says.

AHCP mostly provides coverage in northern and central Illinois to commercial groups, state, and federal employees. AHCP also covers low-income people receiving Illinois Department of Public Aid and federal Medicare, plus some customers in Indiana and Arkansas.

If the court approves the state's petition, the state "will immediately make an attempt to move those enrollees [only Illinois residents] to another viable plan," Darling says. The state will tap a fund called the Illinois Health Maintenance Organization Guaranty Association to pay doctors' and hospitals' eligible claims up to a limit of $300,000, if the petition is approved. Doctors and health care administrators are prohibited from asking customers to pay money owed by AHCP.

As for the 4,500 enrollees living out of state, their coverage would be canceled as soon as the petition is approved, Darling says. Because the state of Illinois cannot offer them any protection, out-of-state customers will have to choose other plans.