DENVER — Colorado Insurance Division Director Michael Conway and his staff have been drafting legislation to protect consumers if their health insurance company becomes insolvent. The legislation will also cover other insurance companies from the possible financial losses they might incur from another insurance company going under.

In an interview with the Valley Courier related to the legislation, Conway began with this regarding Friday Health Plans Inc., "The state of Texas has put that license into liquidation, and the state of Oklahoma has taken action against its license. We are concerned about those issues, and we are staying very close to Friday [Health Plans Inc.] We are staying very close to them, so we stay abreast of their financial situation, and we are continuing to have ongoing conversations with them. We are also taking steps to make sure we have as much protection in the marketplace as we can if something goes poorly here."

In early March, Friday Health Insurance Plans notified 98 employees that they would be laid off in 60 days, according to documents the company filed with the Colorado Department of Labor and Employment and internal documents obtained by the Valley Courier. In November of last year, the company laid off 55 employees in Alamosa.

It is difficult to estimate the total number of employees remaining at Friday Health or the number of employees in Alamosa. The company has declined to comment.

In Late March, the Texas Division of Insurance seized the assets of Friday Health there and began its liquidation.

On April 5, Oklahoma Insurance Commissioner Glen Mulready announced that he placed Friday Health Plans of Oklahoma, Inc. (Friday Health) under the Oklahoma Insurance Department's (OID) supervision. Friday Health is a health maintenance organization domiciled and licensed only in Oklahoma.

At the time, Oklahoma Commissioner Mulready stated, "The decision to place Friday Health under supervision was not taken lightly. However, given the company's financial situation, we determined this was the best action to protect policyholders and ensure their claims are paid."

In Colorado, the Life and Health Guaranty Association step in and pay claims if an insurance company fails, it an insurance company goes into liquidation, the guarantee association steps up and pays the claims that the failed insurance company doesn't have the ability to pay," according to Conway, Health Maintenance Organizations are not currently covered in Colorado by the Guaranty Association, added Conway, "It's a problem John, that we don't have HMO's in our Guaranty Association, if one fails, we would have hospitals and providers not getting paid. We have a fair, if not a great deal of concern that could lead to failures of hospitals or providers."

Conway said the division is introducing legislation to remedy this in a bill that State Representative Kyle Brown, who is on the Health and Insurance Committee, will introduce.

According to Conway, "The legislation will include HMOs into the Guaranty Association, in case the worst happens, and Friday [Health Plans] isn't able to make it. As we sit here right now, Friday Health, from what we can see in their financial situation, Friday Health, the Colorado-licensed company, is well-capitalized.

"We're concerned if Friday and Bright don't make it and they go into insolvency and or Friday fails and goes into insolvency this year, we're worried they won't be able to make their Risk Adjustment Payments in Colorado, and if they don't make their Risk Adjustment Payments, we're worried it could actually lead to other insurance companies failing,” Conway added.

The scenario the state wants to avoid is the cascading effect one insurance company's failure might have on others and to protect consumers' health insurance coverage.

Vince Plymell from the division offered this description of these payments,

"Risk Adjustment Payments are payments from the insurers who end up with lower-risk enrollees (so, healthier people) that are made to plans with higher-risk enrollees (sicker people). It spreads the financial risk across the companies."

According to Conway, the proposed legislation would allow funds from the insolvent company to be used for other insurance companies to cover their Risk Adjustment Payment liabilities and keep them solvent.

"We're concerned that some companies or a company that has a fairly substantial risk adjustment receivables if they're not paid, if Bright and Friday fail, that could take down other insurance companies as well, and then, John, we are worried about and we are trying to stop with this legislation is a cascading effect of insurance companies failing, leading to possible provider failures as well," he said.

The Valley Courier gave Friday Health Plans CEO Beth Bierbower the opportunity to comment on this article, and on her behalf, Columbia Clancy responded, "We respectfully decline the opportunity.”