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Hawaii moves to liquidate Family Health Hawaii

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Hawaii Insurance Commissioner Gordon Ito has obtained a court order that authorizes him to put Family Health Hawaii MBS, a small mutual benefit society carrier, into liquidation, officials said.

The order was signed by Karen Nakasone, a state circuit court judge. 

See also: Medical claim reviewer sues failed N.Y. CO-OP

Ito is implementing the liquidation order immediately because of 2015 financial filings which showed that Family Health, an organization owned by its employer members, lacks the minimum level of net worth required by state law and has no prospect of making up the deficit, according to officials.

Family Health Hawaii has been providing coverage for about 420 employer groups with a total of about 6,000 covered lives. It has no individual policyholders. The employer clients can buy replacement coverage from four other carriers, officials said. All policies will be canceled May 6, according to officials.

Family Health was started in 2013, outside the Consumer Operated and Oriented Program (CO-OP) framework created by the Patient Protection and Affordable Care Act of 2010 (PPACA).

J.P. Schmidt, a former Hawaii insurance commissioner, has been the chief executive officer.

A single investor has infused $5.3 million of cash into the society since February 2013, and the society has lost about $6.5 million since then, according to the liquidation order. Because of the company’s financial condition, it was not able to write new business or renew existing policies for 2016, Ito says in the order.

Family Health managers have been trying to come up with a restructuring plan. In the order, Ito questions whether the managers could really come up with the cash needed to put the company on sound footing. 

Family Health has posted a notice to providers saying that providers should file claims through the normal process up until when the coverage terminates, on or after May 6. 

“Claims will either be admitted or denied as a claim against the FHH estate and its assets,” according to the notice. “The liquidator is accessing the financial situation of the FHH at this time to determine its ability to pay your claim.” 

See also:

Kentucky CO-OP liquidator posts agent notice

What happens if health insurers fail?


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