It’s still unclear if Nebraska will follow suit with tens of millions of dollars at stake, but Iowa’s Insurance Commissioner Nick Gerhart is filing a lawsuit against the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services.
The suit focuses on the way millions of dollars are divided up from the liquidated CoOportunity insurance exchange. That non-profit health insurer was set up to serve Iowa and Nebraska under Obamacare, but Gerhart made the decision to shut it down after determining it didn’t have enough money to operate.
CoOportunity covered 120,000 people in Nebraska and Iowa before going bust last year. It collapsed without the capital to support itself after amassing $150-million in liabilities.
Gerhart’s spokesman, Chance McElhaney, says the concern now is the money that was left over.
McElhaney says the lawsuit is based on where the federal government stands compared to other creditors when it comes to the money. Gerhart says the feds believe they should be paid first.
“The federal government has taken the position that they have a super-priority ahead of all other creditors,” McElhaney explains. “The insurance commissioner…believes otherwise, that they are not the super creditor, vis-a-vis all other creditors.”
McElhaney says the money would first go to the guarantee associations that paid the medical claims, but ultimately the states could end up on the hook if not paid from the liquidation funds.
“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,” McElhaney says.
The federal government is claiming it is not subject to the authority of the Iowa district court, which would force the proceedings into federal court. McElhaney says a court hearing has not yet been set.
Twelve of the 23 health cooperatives established under the Affordable Care Act failed.