Friday, July 6, 2001

UHA under
scrutiny for
30 days

Financially troubled health
insurer will be run by the state

By Lyn Danninger

It will take about 30 days to determine whether troubled health insurer University Health Alliance can be successfully rehabilitated, according to state Insurance Commissioner Wayne Metcalf.

Earlier this week, Metcalf petitioned state Circuit Court for a rehabilitation order allowing the state Insurance Division to take over UHA operations. That order was granted yesterday. Previously, UHA was being supervised by the Insurance Division. The company was required to have all financial transactions approved by the Insurance Division.

UHA's management will remain in place, but will be overseen by the division until its long term viability is determined.

UHA's liabilities, including state mandated minimum reserves, exceed its assets by $2.3 million, according to Metcalf's petition.

UHA entered into a supervisory agreement with the Insurance Division in May, after failing to meet state minimum cash reserve requirements. At that time, Metcalf gave the company until June 30 to create a turnaround plan.

Metcalf said several events added to UHA's recent financial woes. The company had difficulty obtaining re-insurance coverage to pay for unforeseen costly claims and had incurred a large medical claim costing five times more than it had calculated.

In addition, Metcalf said UHA's overall financial projections may have been too optimistic.

"When you are small and thinly capitalized, those kinds of events can quickly change a company's prospects," Metcalf said.

With the rehabilitation order now granted, Metcalf said his division will be aggressively looking for potential investors in the company to ensure UHA's ability to survive.

In spite of UHA's financial problems, Metcalf said he was "'cautiously optimistic" it could survive.

UHA Executive Vice President and Chief Operating Office Frank Appel said that in spite of financial difficulties, UHA is still meeting its day-to-day financial obligations.

"It's business as usual," Appel said.

UHA is a nonprofit mutual benefit society that provides health insurance for about 32,000 members.

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