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Gaps in state and federal insurance rules could create surprising traps for consumers affected by health insurer failures.

See also: Regulators back away from PPACA 3 R’s accounting draft.

Regulators at the Iowa Insurance Division talk about some of the traps they have discovered in a notice aimed at consumers who have major medical coverage from CoOportunity Health.

CoOportunity was one of the new nonprofit, member-owned Consumer Operated and Oriented Plan (CO-OP) insurers created by the Patient Protection and Affordable Care Act (PPACA). The company was successful at attracting business through the PPACA exchange system, and it ended up with about 100,000 enrollees in Iowa and Nebraska.

CoOportunity faced a shortage of cash because of a combination of high claims and delays in the payments that are supposed to be coming from PPACA reinsurance, risk-adjustment and risk corridors risk-management programs. Iowa filed a petition for liquidation with a state court in Iowa in January. 

Iowa regulators expect to have the state court make the liquidation of CoOportunity effective Feb. 28.

The ordinary PPACA open enrollment period ends Sunday. To buy 2015 individual major medical coverage after that date, a consumer will have to qualify for a special enrollment period (SEP). Once CoOportunity is liquidated, enrollees who have not already found new coverage will get a 60-day SEP they can use to buy new coverage, officials say.

Individuals who fail to act and stick with CoOportunity will end up with coverage from a state guaranty fund, Iowa officials say.

One trap is that the guaranty fund in Iowa, for example, has a coverage limit of $500,000 per individual, officials say. PPACA now prohibits a major medical insurer from imposing any annual or lifetime caps on benefits. Although $500,000 “sounds like a lot of money, one serious illness or accident, or one prolonged hospital stay, may cost over $500,000,” officials say. 

Another trap is that consumers who have met the CoOportunity deductible for 2015 and replace their CoOportunity coverage with new major medical coverage may have to meet a new deductible. The insurer that provides the replacement coverage has no legal obligation to give a former CoOportunity enrollee credit toward the deductible for the new coverage, officials say.

A third trap has to do with SEP rules.

Consumers can qualify for SEPs after Feb. 15.

In Iowa, “insurance companies are not required to sell policies to individuals outside of the marketplace open enrollment period,” officials say.

Because insurers in Iowa have no legal obligation to offer SEP coverage, “the division is not certain if any plans will be available,” officials say.

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