Iowa Insurance Commissioner Nick Gerhart has filed suit against the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services, claiming that the federal government has unlawfully withheld funds related to the liquidation of CoOportunity Health.
Nebraska, a state also previously covered by the non-profit insurer, has yet to announce if it would take legal action against the federal agencies, as well.
Gerhart chose to close down CoOportunity last year after determining that the insurer did not have enough money to operate, amassing $150 million in liabilities.
Before its closure, the insurer covered as many as 120,000 individuals in Iowa and Nebraska.
In the lawsuit, Gehart claimed that the federal government is withholding over $20 million due to CoOportunity’s closure. The suit also claimed that the federal government owes $130 million from the "Risk Corridor" program established by state law to reduce insurer risk.
“The federal government has taken the position that they have a super-priority ahead of all other creditors,” said Chance McElhaney, a spokesperson for Gerhart. “The insurance commissioner…believes otherwise, that they are not the super creditor, vis-a-vis all other creditors.”
McElhaney explained that the money should typically first go to the guarantee associations that paid the medical claims, but mentioned that Iowa and Nebraska need to be paid if they want to avoid a costly blow.
“It would be a direct impact of $20-million to the State of Iowa — about $40-million to state of Nebraska — for $60-million total,” the spokesperson said.
In response to the suit, the federal government claimed that it is not subject to the authority of the state district court, reported Nebraska Radio Network.
