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South Carolina group health carrier fails

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South Carolina Health Cooperative — a member-owned, nonprofit health carrier — has collapsed, forcing 500 small businesses to find other health coverage.

Businesses in South Carolina organized the carrier as a self-funded multiple employer welfare arrangement (MEWA). The MEWA operated outside the Consumer Operated and Oriented Plan framework created by the Patient Protection and Affordable Care Act (PPACA).

The MEWA was licensed in 2012. It was providing coverage for about 4,600 people when it shut down, and it had no guaranty fund protection.

Raymond Farmer, the South Carolina insurance director, has asked a state court for permission to put the MEWA in rehabilitation.

The South Carolina Department of Insurance raised concerns about the MEWA in October. The department was waiting for the MEWA to find an insurer to take over its business, but the department decided to put the company into rehabilitation after it found that two of the letters of credit providing security for the MEWA’s reserves were fraudulent, officials say.

The department formally assumed control of the MEWA’s operations in November, and it shared information regarding the fraudulent letters of credit with the MEWA’s board three days later, officials say.

A lawyer for the MEWA was not immediately available to comment on the case.

The South Carolina department tried to find a health insurer to take over the member plans, and it later organized health insurance fairs to help the member employers get coverage with a retroactive effective date.

South Carolina also has a PPACA CO-OP plan, Consumers’ Choice Health Plan. That carrier is still in business. Consumers’ Choice had about 50,000 individual qualified health plan (QHP) enrollees in 2014.

Iowa insurance regulators put CoOportunity Health, a PPACA CO-OP in their state, in rehabilitation in December.