Health Law Monitor

Kentucky Insurer Placed Into Rehabilitation

November 3, 2015

Struggling insurance cooperative Kentucky Health Cooperative was placed into rehabilitation by the Department of Insurance late last week.  KYHC had already announced that it was ceasing operations and would not be writing any new business after end of year.  Now, the Department of Insurance will take over the company and oversee the winding up of KYHC’s affairs.

Rehabilitation is a legal step the Department of Insurance can take for insolvent insurers under KRS Chapter 304.33.  The Department of Insurance will take over the day-to-day operations of KHC and will establish a formal process for submitting claims.  Typically, the insurance company will eventually transition from rehabilitation into liquidation.  Given KYHC’s troubled past and stated intentions for the future, a transition to liquidation is almost a certainty.

The Department of Insurance has been authorized to retain Jeff Gaither and David Hurt as the Special Deputy Rehabilitators.  Once retained, they will oversee the operations on a day-to-day basis, but that transition could take a little time. 

While that transition takes place, providers will need to continue to provide care to KYHC members under their current provider contracts.  Paragraph 6 of the Rehabilitation Order entered by the Franklin Circuit Court specifically states that all provider contracts shall remain in force and cannot be canceled, even if there was prior notice of cancelation or attempt at cancelation.

Providers who serve KYHC members or who have provider contracts with KYHC will need to monitor the KYHC rehabilitation closely.  In order to qualify to potentially receive payment on outstanding claims, providers will need to meet the requirements and deadlines established by the Special Deputy Rehabilitators once a plan for the orderly liquidation of the company is approved.

For more information, please contact Jay Ingle in the Firm’s Lexington, Kentucky, office.