Colorado is shutting down insurer Friday Health Plans, impacting more than 30,000 people

Colorado regulators on Monday moved to shut down and liquidate failing health insurer Friday Health Plans, a rapid and dramatic conclusion to a story that state officials had hoped would end less brutally.

The move means that the more than 30,000 people covered by a Friday plan in Colorado will need to find new insurance this summer or risk going uninsured.

It also means that those consumers could have to start paying toward a new deductible, potentially costing some of them thousands of dollars in unexpected insurance costs. State regulators, though, are hoping to set up a system to blunt that impact. (More on this below.)

"We were hoping we were going to be the one state that could get Friday through the end of the plan year," Colorado Insurance Michael Conway said. "Instead we're joining all the other states that had Friday in their network."

Why Friday Health Plans collapsed so fast in Colorado

Friday's failure has been an ongoing insurance disaster across the country, and numerous other regulators have already shut down the company's operations in their states and begun liquidation.

In a statement posted to its website last month, Friday — which was headquartered in Colorado and one of a handful of "insurtech" companies to struggle in recent years — said its failure was the result of too-fast growth and being "unable to scale our financial infrastructure to match the pace of our growth and secure the additional capital required to run our business."

Colorado officials had hoped Friday would have enough money left in its operations here to make it through the end of the year, based on financial statements that the company had presented to state regulators. If that happened, consumers wouldn't have needed to find new insurance immediately.

But Conway said it became clear as regulators dug into Friday's financials that the situation wasn't as optimistic as presented. After the state took over Friday late last month, Conway said regulators learned that Friday still owed unpaid taxes to the federal government, as well as roughly $2 million in fees payments to the state's insurance exchange, Connect for Health Colorado.

"Really almost from the moment we filed for rehabilitation, things started to take a very fast turn against us," Conway said.

Other issues popped up, as well — namely that some doctors and at least one hospital system started refusing to see Friday customers, worried that they may not get paid for the work, Conway said.

Those concerns were unfounded, Conway said. Even if Friday ran out of cash to pay claims from the current year, the state has something called the Colorado Insurance Guaranty Association — an FDIC-like entity that backs insurers and is funded through fees paid by insurers — that would have stepped in to pay those bills. The medical providers also had contracts with Friday that were still in force, Conway said.

But complaints that medical providers weren't seeing Friday customers quickly mounted. Conway characterized them as being in the dozens. And that overwhelmed the state Division of Insurance's ability to address those complaints quickly.

"There's a practical reality that enforcing that contract would take us a period of time and it would take us bandwidth," Conway said.

Lastly, Conway said that there was concern over the timing of shutting Friday down. Had regulators waited longer, it could have begun to overlap with open enrollment for next year's insurance plans, adding confusion for consumers and extra work for Connect for Health Colorado, the state's insurance exchange.

"The last thing we want to do is to have this company's failure end up negatively impacting the entire market for the 2024 plan year," Conway said.

What comes next for Friday customers

Friday's coverage will cease in Colorado at the end of August. That means Friday's customers will need to have a new insurance plan take over on Sept. 1 or risk having a gap in coverage.

The state has opened a special enrollment period for Friday customers. The enrollment period will run until Oct. 31. During that enrollment period, Friday customers can shop for a new plan on Connect for Health Colorado or through an insurance broker. (Conway said about 80% of Friday's customers in Colorado signed up through a broker.)

Consumers must purchase a new plan by Aug. 31 to have coverage that starts on Sept. 1. People who enroll after that will have coverage that starts on the first day of the following month.

People whose health care providers have stopped seeing them because they are covered by Friday will be allowed to switch to a new plan faster, but only if they purchase the new plan by July 31. That new plan would kick in on Aug. 1.

Any new insurance plan, though, will likely come with a new deductible. A deductible is the amount a consumer needs to spend before insurance benefits really kick in. For instance, a plan with a $5,000 deductible requires consumers to pay the first $5,000 of medical bills per year before the insurance company starts picking up the tab, though there are things that insurers must cover at no cost to consumers.

Many people on Friday plans have likely already paid something toward their deductible. Switching to a new insurer means they will effectively forfeit that money and will have to start paying all over again toward the deductible.

Conway said one insurer — Kaiser Permanente — has so far agreed to honor the deductible payments that Friday consumers have already made this year if those consumers switch to a Kaiser plan. But switching to a Kaiser plan may also cause consumers to need to switch doctors.

The state is also working on another solution: Allowing consumers to make claims against Friday as regulators liquidate its assets. Conway said that system is still under development, and the details of how it will work — and how fast it will work — are still to be determined. But he said such claims would be given highest priority in the liquidation.

"Where the work is really going to come into play is to try to figure out the simplest way to do that for these consumers," Conway said.

Support for the decision

The state's move to liquidate Friday drew support from some health care industry associations.

Meagan Fearing, a health insurance broker and the immediate past president of the Colorado branch of the National Association of Benefits and Insurance Professionals, said brokers had suspected for weeks that Friday's crash was coming.

She said the company laid off much of its workforce late last month. Similarly to regulators, she also said she and other brokers had heard from clients with Friday plans whose doctors were reluctant to treat them. Some clients said they had been told they had to make large upfront payments to their doctors in order to receive care.

Fearing said she and other brokers resolved the issues by sending the doctors information from the state Division of Insurance. But she said the problem appeared to be growing.

"We were actually hopeful that they might stop the hemorrhaging before it got too bad and also minimize the impact to open enrollment," Fearing said of state regulators. "I think that's the path that the DOI took, ultimately, and I am thrilled to see that."

The Colorado Hospital Association also supported the decision.

"CHA and its member hospitals and health systems appreciate the swift action by the DOI after Friday Health Plans withdrew from the state," read a statement the organization released Monday. "The DOI's efforts will help ensure that patients can access care and not get penalized financially."

Saskia Young, the executive director of the Colorado Association of Health Plans, a trade group for insurers, said in a statement that her organization's members are working with the state to create "a seamless transition" to new plans for current Friday enrollees.

But, she said she was concerned about the financial impacts the shutdown could have on other insurers, especially as the Division of Insurance works more broadly to drive down the prices that health insurers charge for coverage. Young tied the shutdown to one particular issue regulators are currently working on — the review and approval of proposed health insurance prices for next year's plans.

"We appreciate the work of the Division of Insurance to navigate the situation and continue to reiterate the importance of ensuring that premium rates for 2024 are adequate given this latest upheaval in Colorado's insurance market," Young said.