- Associated Press - Tuesday, February 4, 2014

IOWA CITY, Iowa (AP) - A nonprofit that subsidizes insurance policies for Iowans with health risks is suing the state’s three public universities, claiming they are refusing to pay millions in legally required fees.

The Iowa Individual Health Benefit Reinsurance Association says the universities’ nonpayment could lead to higher assessments for other government agencies that are members and higher costs for patients. The lawsuit, filed in November, seeks to force the schools to pay overdue assessments estimated at $1.5 million and rising, plus late fees and legal costs.

“They are deadbeats,” said Joe Day, a Cedar Rapids lawyer who is president of the association’s board. “They are accountable to nobody but themselves. That seems to be their attitude. … They would just as soon kill our program if it costs them a dime.”

A spokeswoman for the Iowa Board of Regents, which governs the universities, said Tuesday they would fight the lawsuit, contending state law does not require them to pay.

Iowa lawmakers created the association in 1995 to help Iowans with medical conditions and other health risks that left them unable to obtain coverage elsewhere. Under the law, insurers were required to sell basic plans to those individuals at below-market rates.

To pay for the insurers’ losses covering those patients, the association is required to charge assessments to insurers and public self-funded health plans in proportion to their market share. The idea is to spread out the expense of covering the high-risk population among all insurers.

More than 10,000 Iowans received coverage from the plans in 2000, but participation has declined after state officials closed enrollment to new patients in 2005 and created a separate high-risk pool. The federal health care overhaul also undermined the program’s necessity. Still, as of Jan. 1, 2013, nearly 1,900 people remained in the plans, the majority offered by Des Moines-based Wellmark.

Wellmark Vice President Patricia Huffman, an association board member, said patients haven’t been affected by the universities’ refusal to pay but that higher costs were possible “down the road.”

The current impact is that insurance carriers are not receiving full refunds to cover losses as required by law. If the universities get out of paying, higher assessments could be required for other members, which include insurers and public agencies that are self-insured, such as counties, school districts and state government, the lawsuit warns.

Iowa State University and the University of Northern Iowa had paid assessments since 1997, and the University of Iowa became eligible in 2010 after becoming self-insured, the association says.

The association charged the UI $508,000, ISU $198,000 and UNI $78,000 to cover their share for 2010 - about 5 percent of the $16.7 million in losses that year.

The executive director of the regents, Robert Donley, responded in a March 2012 letter that the universities “have elected not to participate in the association” and would not pay. The law does not list them as being among the providers who must do so, he wrote.

The universities then declined to submit the information required to calculate 2011 assessments, and the association charged them the same amounts as 2010. The schools again didn’t pay.

Day said the lawsuit is the association’s first filed against members with delinquent payments and came only after other efforts to collect the money failed. He said he expects the lawsuit will be amended to seek payment of 2012 and 2013 assessments when they’re calculated.

“We feel that it’s necessary that we make everybody pay who is required to pay. Otherwise, we are cheating the taxpayers of the state,” he said. “Why should the University of Iowa not pay, when the state of Iowa pays?”

Lawyers in the Iowa Attorney General office, which is representing the schools, have asked a judge to dismiss the lawsuit, arguing that lawmakers removed the association’s power to sue in 2001 and that disputes between state entities must be settled through arbitration.

The universities cannot be required to pay assessments that benefit insurers under a provision in the Iowa Constitution, they added.

“The assessments at issue are redistributed to cover the losses of private insurance companies,” they wrote. “The Regents would thus become responsible for the debts of a corporation, which is constitutionally prohibited.”

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