Insurance commissioner sues contractor for failed Kentucky Health Cooperative, alleging gross negligence in handling claims

State Insurance Commissioner Brian Maynard, acting as liquidator of the failed Kentucky Health Cooperative, filed suit in Franklin Circuit Court Friday against against the company that the co-op hired to process and pay claims. The suit contends that CGI Technologies and Solutions Inc. was “grossly negligent” in processing and paying claims and thus breached its contract.

The co-op, created by federal health reform to compete with insurance companies and hold down premium costs, had financial problems from the start. This year Republicans accused former Gov. Steve Beshear, a Democrat who embraced health reform, of holding down co-op premiums to make the reforms look good. Beshear denied the charge.

The co-op announced in October 2015 that it would close because Congress did not provide sufficient “risk corridor” payments to insurers with disproportionately sick policyholders and the Obama administration was unwilling or unable to make up the difference. The co-op, which had a deficit of $50 million in 2014, was expecting a risk-corridor payment of $77 million but got only $9.7 million. Most other co-ops also failed.

“We have a duty to investigate the causes of the co-op’s collapse and to hold responsible those individuals who caused the collapse,” Maynard said in a press release. “This includes recovering funds from responsible parties so that the doctors, nurses, and hospitals that treated Kentuckians insured by the co-op are fairly compensated for their services.”

Thousands of patients and thousands of providers will have to wait until Oct. 15 or later to find out how much of their medical bills sent to the co-op will be paid, Kentucky Health News reported in February. The co-op “left thousands of providers waiting for payment,” Stephanie Armour reported for The Wall Street Journal. It covered about 51,000 people through the end of 2015. Franklin Circuit Judge Phillip Shepherd will decide how much will be paid to whom.