The Louisiana Department of Insurance has taken over Metairie-based Louisiana Health Cooperative Inc., a nonprofit health insurance company created with $66 million in federal loans.

District Judge Donald Johnson issued an order Tuesday granting the department’s request to place the co-op into rehabilitation. The order allows Insurance Commissioner Jim Donelon to take possession and control of the failed insurer. The department’s regulators have been stationed at the co-op since July 29.

“Our on-site review and analysis of the Louisiana Health Cooperative’s operations led us to the decision that placing it in rehabilitation is in the best interests of its policyholders and providers, as well as taxpayers,” Donelon said.

Donelon said the co-op, with the support of the federal Centers for Medicare and Medicaid Services, will be able to pay its claims.

State law allows the insurance commissioner to place an insurer into rehabilitation under certain conditions, including when allowing a company to keep doing business would be hazardous to its policyholders, those the insurer owes money and the public. The court order allows the insurance commissioner to “conduct all of the business and affairs” of the cooperative.

In requesting the court order, the Insurance Department said the co-op may not be able to pay its debts.

Top stories in Baton Rouge in your inbox

Twice daily we'll send you the day's biggest headlines. Sign up today.

The co-op’s second-quarter report shows it has around $180,000 in capital and surplus, the cash cushion that protects policyholders in case of unexpectedly high claims. State law requires HMOs to maintain $3 million in capital and surplus.

“They say they’re minimally in the black still. We’re not ready to sign off on that assessment,” Donelon said. “But it’s irrelevant because even with their numbers, they are below the required capital to continue operations.”

Donelon said regulators are now running the company. “Who will continue to be employed there has yet to be decided,” he said.

The co-op’s roughly 17,000 policyholders should continue to pay their premiums and schedule doctor’s appointments just like normal, Donelon said. Customers’ policies will be honored, and no one’s health insurance policy will be canceled.

Providers are required by their contracts to keep treating policyholders. The Insurance Department will work with providers to make sure they are paid in a timely manner.

However, the co-op will not offer coverage after Dec. 31, which means the company’s customers will need to find a new health insurer for 2016. Open enrollment begins Nov. 1 and ends Jan. 31.