State Insurance Commissioner Rey Graulty today said that a Circuit Court judge has appointed him as PGMA's rehabilitator after the state instituted legal proceedings against the company last week.

"(PGMA's) management team didn't seem to have the expertise needed to carry out an operation of this scope," Graulty said.

Graulty said the seizure was prompted by PGMA's numerous delays in covering medical claims. He also said the state Attorney General's office has opened a criminal investigation involving the company but he declined to disclose the details. The office declined to comment.

PGMA executives could not be reached for comment.

Graulty said that he has installed a new management team at PGMA, including Michael Saccone of Peterson Consulting LLC. Peterson Consulting specializes in rehabilitating medical insurers.

Graulty also said that he's notified all of the major local hospitals and they have agreed to continue serving PGMA's customers. He added that he plans to notify employer groups that are covered by PGMA.

Graulty stressed that PGMA is "operating on a positive cash flow" and said that customers' medical claims and prescriptions will be covered during the rehabilitation period.

He said PGMA, a low-cost provider, once covered 26,000 people in the state. But that fell to 12,000 when the United Public Workers union and the Hawaii Government Employees Association dropped PGMA earlier this month over a dispute about premiums.