By Corinne Ramey

Mount Kisco Medical Group PC, in the Hudson Valley, provided care to more than 13,000 patients who used Health Republic Insurance of New York.

But the insolvent insurer, which the state and federal regulators shut down in September, left the Mount Kisco medical practice with millions of dollars in unpaid claims, said Scott Hayworth, a physician and the group’s president and chief executive.

“My doctors are upset,” Dr. Hayworth said. “They agree that they need to take care of patients because that’s our primary obligation in life, but no one likes to do work and not get paid for it.”

The demise of Health Republic, the largest of the nonprofit cooperatives created under the Affordable Care Act and the only co-op in New York state, left its more than 215,000 enrollees scrambling to find new insurance. In the past month, the state has announced initiatives to ease the impact on consumers, including automatically enrolling Health Republic members in other plans.

But New York’s physicians and hospitals say the shutdown has left them, too, in a lurch.

The trade organization Greater New York Hospital Association said Health Republic owes hospitals statewide more than $165 million.

The Medical Society of the State of New York, a physician’s association, said of 800 doctors surveyed, 43% have claims unpaid by the insurer. Of these, 18% said they were owed $25,000 or more.

The problem particularly affects providers in New York City, Westchester County and on Long Island, where most Health Republic customers lived. Suffolk County alone had 43,703 Health Republic members, or 21% of the co-op’s membership, according to the insurer’s regulatory filings.

Health Republic referred all questions to the state’s Department of Financial Services. A department spokesman said a financial review was ongoing, and payments to providers would depend on the review’s results. “We’re working to conserve assets and maximize the amount of claims the company can pay,” he added.

A quirk of state law has compounded the problem. All states have so-called guaranty associations, which function as safety nets if an insurer falls into insolvency.

That meant that when regulators shut down CoOportunity Health, a co-op in Iowa and Nebraska, those states’ guaranty associations covered more than $110 million in unpaid claims of hospitals and physicians, said a spokesman for the trade group National Organization of Life & Health Insurance Guaranty Associations.

In some states, however, the health insurance co-ops weren't licensed as health-insurance companies, and therefore not covered.

New York is the only state where the guaranty association doesn’t cover claims of health-insurance companies. But it does cover health-insurance claims if policies are sold by a life-insurance company.

“With the onset of the exchanges, and growth in individual health insurance market, in retrospect this lack of guaranty program for health insurance sold by health insurance companies certainly seems to be a tremendous gap in the safety net,” said Scott Harrington, a professor of health-care management at the University of Pennsylvania’s Wharton School.

The hospital association is lobbying state government for a guaranty fund—with money from insurers—to protect hospitals in the future, said Kenneth Raske, the organization’s president. “It would be a travesty of justice if the hospitals were ultimately denied payment,” he said.

The New York Health Plan Association, a trade group of health insurers, responded that the hospitals “are worried about their own wallets” and suggested using state funds to pay the Health Republic claims.

Further complicating the Health Republic saga is that it relied on an outside company, MagnaCare, for its network of providers. MagnaCare said that due to concerns over Health Republic’s financial condition, it moved to terminate its agreement with the insurer in October. The state said it required MagnaCare to keep its network in place through the end of November.

That MagnaCare was able to withdraw from its role is particularly frustrating, said Charles Rothberg, an ophthalmologist in Patchogue, N.Y., on Long Island.

“I feel like a chump that all the other business partners involved in these transactions can walk away and protect their business interests,” Dr. Rothberg said. “As a doctor, I think I have an obligation to continue caring for a patient.

Physicians say the problem isn’t solely financial.

“When you have a disaster like this, it makes physicians very leery in engaging in other health-care reform initiatives that carry similar risks, when the state or feds are unwilling to back the physicians,” said Dr. Joseph Maldonado, a urologist who is president of the Medical Society of the State of New York.

The most vulnerable are private-practice physicians, Dr. Maldonado said. “For those groups,” he added, ”the question is: ‘When the next Health Republic comes on the market, do we sign up with them?’”