Friday Health to shut down at the end of August; some customers can buy new coverage now

Troubled insurer Friday Health will shut down in Colorado months earlier than anticipated, and its customers can start buying new coverage in August.

Friday ran into financial trouble in all seven states where it sold individual health insurance coverage, and is already in liquidation in most. The plan was to keep it running through the end of the year in Colorado, but the combination of worse-than-expected finances and doctors’ reluctance to serve Friday customers made a quick exit the best solution, Division of Insurance Commissioner Michael Conway said Monday.

About 30,000 people purchased a Friday plan in Colorado this year.

The division filed a petition in Denver district court Monday to liquidate Friday Health’s remaining assets in Colorado on Aug. 31. The parent company, which was based in Alamosa, shut down and laid off its remaining employees in early July.

One factor in the decision to shut it down early is the “growing number” of doctors and other providers who are refusing to see patients covered by Friday or requiring them to pay upfront, Conway said. He said the division has received dozens of complaints from patients, and an unknown number have been lodged with a contractor who processes claims for Friday and Connect for Health Colorado, which runs the state’s individual health insurance marketplace.

A change in state law this year would have allowed providers to collect up to $500,000 per patient if Friday ran out of assets to pay its claims, Conway said. They don’t seem to trust that guarantee, however, and patients faced going without care until January, when new health insurance plans take effect, he said.

“We can’t let that be the case,” he said.

Friday customers whose doctors won’t take their insurance can use an “emergency” special enrollment period through July 31 to buy new coverage starting in August. All other customers need to choose a plan before the end of August, so they don’t have a coverage gap when the company shuts down.

Kevin Patterson, CEO of Connect for Health Colorado, said in a statement that he’s confident that the existing network of brokers and others who help with enrollment will be sufficient to meet the needs of Friday customers who are switching plans. People who have questions about their insurance and the special enrollment periods can also contact Connect for Health Colorado, he said.

The division asked other insurers in the state to not collect additional out-of-pocket costs if Friday customers have already hit their deductibles or annual spending limits, but only Kaiser Permanente has agreed to do that, Conway said. The state is working on setting up a program to let customers whose new insurance requires them to meet their deductibles twice to file a claim for reimbursement against Friday’s assets, he said.

In addition to the increasing number of consumer complaints, Friday’s deteriorating financial situation made quick action necessary, Conway said. The parent company was expected to stay open through September, but its early closure created uncertainty about what it would cost to continue operating the plan, he said. The state has short-term contracts with other businesses that manage Friday’s insurance claims, but would have to negotiate new ones to keep it open through December.

Friday owes about $2.5 million to Connect for Health Colorado, for fees all insurers pay to operate the marketplace, as well as an unclear amount in federal taxes, Conway said. Friday also will face a cash flow problem in the coming months because the federal government isn’t sure it will make its $22 million in risk adjustment payments as required in September and is withholding other payments to cover those, he said. (To try to discourage insurers from picking only the healthiest patients on the individual market, the federal government requires those with unusually healthy customers – like Friday – to pay into a fund that compensates those with sicker customers.)

“Everything has spiraled and we’re having to take Friday into liquidation sooner than we wanted to,” he said.