Nevada insurance regulators are citing questions about the collectability of payments from the new Patient Protection and Affordable Care Act (PPACA) risk corridors program as one reason to put a struggling health maintenance organization (HMO) into rehabilitation.

Amy Parks, Nevada’s acting insurance commissioner, has filed a petition with a state court in Nevada seeking court permission to become the receiver for the carrier, Nevada Health CO-OP, and begin rehabilitation proceedings.

Nevada Health CO-OP is one of the nonprofit, member-owned carriers formed with startup loan money from the PPACA Consumer Operated and Oriented Plan (CO-OP) money. Because the CO-OP is organized as an HMO, it has not been eligible to join the Nevada Life and Health Insurance Guaranty Association, according to an affidavit included with the petition.

Nevada set up a severely troubled state-based PPACA exchange, and exchange plan issuers in the state, including the CO-OP, complained early on that they were having trouble getting even basic information about the number of enrollees they had.

The CO-OP now has about 21,000 enrollees, up from 14,000 in 2014. 

The CO-OP had total admitted assets of about $48 million on June 30, total liabilities of about $41 million, and about $7.1 million in capital and surplus. It reported a $30 million net loss for the first half of the year.

Annette James, an actuary who helped examine the CO-OP, said in an affidavit included with the petition that she noted when reviewing the CO-OP’s financial statements that the “significant and continuing underwriting losses experienced by the CO-OP” indicate that “the premiums charged were insufficient.”

The company’s operating loss for the first half is greater than 50 percent of the CO-OP’s surplus, and the loss is likely to reduce the CO-OP’s capital and surplus level below the statutory minimum.

The CO-OP has about $15 million in unpaid claims, or about $700 in unpaid claims per enrollee.

Managers announced a decision in August to wind down the operations of the CO-OP by Dec. 31.

See also: Nevada CO-OP to shut down

Parks says she wants to put the plan in a formal receivership because there are signs the CO-OP is in “unsound condition.”

“The CO-OP does not have access to additional sources of capital to improve the financial outlook,” according to the petition.

The CO-OP is in line to get $16 million from the PPACA risk corridors program, a PPACA program that is supposed to use cash from PPACA public exchange plan issuers that did well in 2014 to help carriers that did poorly, but the collectability of that accounts receivable is uncertain, according to the petition.

Nevada insurance regulators intend to require the board of the CO-OP to consent to a receivership as a condition for letting the CO-OP exclude PPACA startup loan obligations from its total liabilities for the second quarter, according to the petition.

Pam Egan, the CO-OP’s chief executive officer, said in a statement that the CO-OP board is cooperating with the Nevada Division of Insurance, is supporting the receivership petition, and sees entering into the receivership as a way to preserve assets while the CO-OP is still operating. “This responsible administrative step strengthens NHC’s ability to protect the interest of our members and meet our obligations,” Egan said in the statement. “We appreciate working with the Nevada Division of Insurance to add this extra layer of protection for CO-OP members.”

Members’ policies remain in effect, and, “as always, members will need to pay premiums in accordance with plan rules for their coverage to remain in effect,” Egan said.

Regulators in Louisiana and New York have recently moved to put CO-OPs in those states under supervision.

Regulators shut down a CO-OP that provided coverage for about 100,000 people in Iowa and Nebraska in late 2014.