The state of Colorado has placed a physician-owned, 11,500-enrollee HMO in receivership for the plan's failure to meet a statutory $1 million reserve requirement.
Health Network, Colorado Springs, will cease covering its members on June 1, the state division of insurance said in a written statement.
Janet Byrne, assistant insurance commissioner of financial regulation, said the plan has been below the reserve requirement since at least July 2000 and was not able to meet the terms of its proposed recovery plan as losses continued.
"Allowing this to continue would be hazardous financially to Health Network's policyholders, creditors and the public," said William Kirven III, state insurance commissioner.
John Gates, chief executive officer of Health Network, declined to comment.
A Denver County judge last week named Kirven as receiver for Health Network. Leif Associates, a Denver-based actuarial consulting firm, will try to tie up the HMO's loose ends by the June 1 closing, according to a court-approved receivership plan.
Health Network lost $577,995 in 2000 on $19.5 million in revenue, according to insurance division figures.
The plan didn't have enough cash to cover the losses, said James Hertel, publisher of the newsletter Colorado Managed Care and hmo-info.com, a Web site that provides access to a database on health plan figures.
Health Network also suffered when some of its doctor-owners began pulling out their financial interest in the past year and from the tough HMO competition in Colorado, Hertel said.
Health Network was founded in 1986 by Physicians Network of Colorado Springs, a 280-member independent physician association. The HMO was managed by 386-bed Memorial Hospital, Colorado Springs, until two years ago, when the doctors dumped the hospital for Pacific Health Dimensions, a healthcare management firm, Hertel said.