Iowa’s insurance commissioner filed a lawsuit against the federal government on Tuesday, alleging that the government is withholding $20m involved with the liquidation of not-for-profit insurer CoOportunity Health — which closed down in late 2014.
“Through the wind down of CoOportunity, we’ve worked collaboratively with CMS (the Centers for Medicare and Medicaid Services) and the federal government on many issues,” said Insurance Commissioner Nick Gerhart in a news release. “In this instance, we tried diligently to settle our differences with the federal government in extensive discussions over several months, but were informed by the Department of Justice that further negotiations would be futile.”
The lawsuit was filed in US District Court in Des Moines, and it seeks the application of Iowa law to control the priority of creditor claims in the CoOportunity estate.
According to Gerhart, the US Department of Health and Human Services and CMS have tried to jump ahead in the creditor line and are violating Iowa or federal law. He took over CoOportunity’s operations in December 2014. There were too many members for its reserves and only $17m in cash and assets on hand. Along with the fact that it could not obtain additional Risk Corridor funds from CMS, this placed the insurer in a precarious situation financially.
Aside from CoOportunity, several insurers have also gone out of business. Out of 23 co-ops created and funded by the ACA, only 11 remain in operation.